Mortgage Rates Fall Slightly But Hold Firm After Fed Announcement

Mortgage rates fell just slightly this week to remain near their lowest levels since February and appear likely to stay there.

While the Federal Reserve does not directly control mortgage rates, their actions often have a significant impact on movements in both the short and long terms. The main issue that markets were anxiously waiting for developments on was the central bank’s program of asset purchases. The program has driven significant demand for bonds in the last year, placing consistent downward pressure on bond yields and the mortgage rates they dictate. A surprise shift in stance – not to mention an abrupt end to the purchase schedule – would be something that sets yields firmly upward. At the July Federal Open Market Committee meeting, the Fed did hint that they are becoming more likely to scale back purchases, but that they were still “a ways away” from making such a move.

As a result, mortgage rates held firm following the announcement, and barring any unforeseen change in language – or a marked pandemic-related improvement – mortgage rates appear poised to remain near their current, low levels in the immediate term.

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