Mortgage Rates Rise, Following Muted Reaction to Fed Announcement

Mortgage rates rose this week but avoided further increases following a muted reaction to a Federal Reserve announcement.

Markets had been hotly anticipating Wednesday’s announcement from the Federal Reserve, which some expected to include a plan for the central bank to begin scaling back on its program of asset purchases. The program has placed consistent downward pressure on bond yields – and thus mortgage rates – since it was implemented in the early days of the pandemic. But the Fed stopped short of announcing any changes to their purchase schedule, instead indicating that they will likely, but not definitely, begin to taper purchases when the Federal Open Market Committee next meets in November. Bond yields barely moved following the statement, suggesting that investors were expecting this news, and mortgage rates held firm as a result. While more meaningful changes may be on the way in the coming days as investors digest the details of the Fed’s announcement, it appears as if the risk of more substantial shifts in rates are behind us – for now. The focus will now shift to key readings on inflation and the labor market due between now and the November Fed meeting.

Should inflation reaccelerate or the labor market resume the strong growth experienced earlier in the summer, a Fed taper would likely become all but certain, resulting in mortgage rates being pushed higher.