Rates Expected to Rise Amid Feds Taper Plan

By
Real Estate Agent with RE/MAX Associates RS - 0019092

With the final quarter of 2021 upon us, mortgage rates remain low and just above the all-time lows seen at the outset of the year when the 30-year fixed-rate mortgage hit 2.65%. As the U.S. economy grew and the labor market strengthened throughout the year, rates increased slightly, which is natural in an improving economy.

Rates were held low due in part to the Fed's massive asset purchase program where it purchased up to $120B worth of mortgage-backed and Treasury securities each month to promote lending. But with the improvement in both the economy and the jobs market along with an uptick in inflation, the Fed is now ready to begin scaling back or tapering those purchases.

The taper announcement could come at the November 3rd FOMC meeting but, as Fed Chair Powell has stated, any tapering will be a gradual process and will be data-driven.

 

 

So, what does this mean for home borrowing costs? Rates will most likely rise modestly if the Fed embarks on a taper plan and if the economy continues to grow. Also, if inflation remains at current frothy levels for longer than the Fed expects, then the taper plan will most likely be laid out at the November Fed meeting. If rates were to increase, it could have an impact on home prices, causing them to moderate slightly after the big gains seen recently.

Bottom line: Rates are still historically low, and it is a great time to either purchase a new home or refinance your current mortgage.

Source: Mortgage Market Guide


 
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Christopher Pataki
RE/MAX Associates - Hockessin
Realtor
302-562-0628
Office:
302-234-3800
Licensed In: Delaware
License #: RS-0019092
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