Mortgage Rates React To The Federal Reserve’s November 2, 2011 Statement

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The Fed sat back and did nothing new today. Mortgage rates are rising because of it.

The Economy "Strengthened"

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent today.

The vote was nearly unanimous, with just one dissenting voter.

In its press release, the Federal Reserve presented an improved outlook for the U.S. economy, noting that since its last meeting in September.

There's new evidence that the economy "strengthened somewhat" in the third quarter, led by consumer and business spending. The economy remains slowed by a number of factors, though, including :

1. "Continuing weakness" in the labor market
2. Softness in commercial real estate
3. A "depressed" housing market

The good news is that inflation remains stable, which helps keep mortgage rates in check across all loan types -- FHA, conforming, USDA and jumbo.

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No QE3 For The Mortgage Market

Mortgage rates are rising post-FOMC. This is because Wall Street expected the Fed to make new stimulus. It didn't. The Fed introduced no new monetary policy, and revised none of its current programs.

In its statement, the Fed re-iterated its plan to leave the Fed Funds Rate in its current range near 0.000 percent "at least until mid-2013″. It also affirmed its "Operation Twist" -- the program in which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.

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There was no mention of a QE3 program in which the Fed buys massive amounts of mortgage bonds, nor was there a change in language that suggests the Fed would consider such a thing. QE3 would drive mortgage bond demand, causing rates to fall.

When no QE3 announcement was made, disappointed investors voted with their cash.

The FOMC's next meeting is December 13, 2011. Expect QE3 chatter to percolate as the date gets nearer.

Mortgage Rates : Rising Faster Than The Fed Can Act

Mortgage rates won't get lower. They've tried. Three times in the past 2 weeks, they've bounced off the bottom-of-the-market because they can't cut through.

For now, conditions are favorable -- steady growth, low inflation, and market uncertainty. As conditions improve, though, mortgage rates will rise. This might be your last chance to get the lowest rates of a lifetime.

If you're shopping for a mortgage, it's time to lock your rate. Yes, rates may fall. But, what if they don't? There's a lot more room for rates to rise than to fall.

Click here to get a rate quote.