the federal reserve made its third attempt in less than three years to stimulate the economy yesterday by announcing a new effort to drive down long-term interest rates. HOW? they plan to buy $400 billion in long-term treasurys in effort to nudge down interest rates making it even cheaper for corporations and consumers to borrow. additionally they intend to reinvest in mortgage-backed securities in effort to keep rates low. this move by the feds has been dubbed “operation twist“.
what has happened to mortgage rates thus far? initially we experienced a knee-jerk reaction as investors poured cash into mortgage bonds therefore driving prices up and rates down approximately a quarter of a percent. my thoughts are this may be short-lived and extremely volatile while investors decode exactly what the feds are doing and its impact on markets overall. if you haven’t refinanced OR pulled the trigger on purchasing a new home while money is cheap this may be the time to do so…..with all the uncertainty and wildcards out there its hard to determine how long mortgage rates will hold.