Twisting the Rates Away

Yesterday the Fed announced a plan to re-allocate its balance sheet as it pertains to mortgage-backed securities. The catchy name?  TWIST.  The new asset allocation places a greater emphasis upon the purchase of longer term notes which in turn will directly impact prices for mortgage rates. The announcement itself was not a surprise; however, the amount of the allocation – $400 billion – was more than most analysts predicted.

Dry stuff I know. But, there is a direct benefit to consumers and this is not an over-hyped event. Consumers purchasing or refinancing will see a substantive change in the terms that are being offered for mortgages.

As is always the case, the Bond market can be volatile. While mortgage-backed securities are in vogue today they may not be in the future.

The Fed’s announcement is not without controversy; there are experts and economists that fear that we are sowing the seeds for tomorrow’s inflation by the actions we are seeing today. Our rather myopic viewpoint, in their opinion, will cause grief in the future. To a certain degree I agree with this assessment; however, there is a real need to stimulate the economy and many economists feel this is a logical choice.  Having already spoken with several consumers and Realtors today about rates, I am beginning to hope that this event truly will stimulate the housing market.

For those consumers that have sufficient equity, good credit and verifiable income, the ingredients are all there for another reason to consider refinancing. And for those consumers looking to purchase, a decrease in rates may very well be the last push needed to get under contract for a new home.  Looks like I’ll be working some long hours.

For those of you that are just as much of a geek as me when it comes to data that influences mortgage rates, you can read more about the Fed policy by clicking here

So, even if you are as embarrassed by dancing in public as I am, shake it off, get out your blue suede shoes and let’s twist the economy away. Have a great day.


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