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Latest News out of the Fed is Good for Mortgage, for Now.

September 1, 2020
Posted in Programs
September 1, 2020 derekevansteam

Federal Reserve Chairman Jerome Powell announced a rebalancing of the Fed’s priorities last week. Mainly, instead of regarding employment and inflation as equally important, it would for now work to stimulate job creation even if that meant loosening the rein on inflation.

Borrowers shouldn’t expect drastically lower rates thanks to the Fed’s action, as the Federal Funds rate is not directly tied to mortgage rates. The Fed has had a bigger impact on mortgage rates recently, because it’s been buying mortgage-backed securities itself. But that’s a temporary intervention and a distraction from normal principles.

Long term, high inflation is bad for low rates, but the consensus view that Powell’s speech will be good for mortgage rates will hold true for the short-term. Let’s hope that time ends up being several years.

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