Fed Signals Taper, Rates Jump

Fed Signals Taper

Last week the Federal Reserve announced their expectations to begin reducing the historic bond-buying stimulus efforts in November, and concluding all purchases by June 2022.  This marked a far faster completion timeline than markets anticipated and within days first mortgage rates spiked to multi-month highs.

The Fed feels the economy has made significant strides since the pandemic began, validating the need for less stimulus.  They now fear further stimulus may cause inflationary pressures to “overshoot” forecasts, raising the costs of consumer goods to uncomfortable levels and even harming the economic recovery.

Economic headwinds remain, however, including lagging employment stateside and slowing economic data abroad. The Fed is hoping these headwinds will subside naturally in time, otherwise they may be forced to maintain their stimulus measures.

The Fed also fears a repeat of 2013’s “Taper Tantrum” which sent mortgage rates soaring over 1.25%!


30yr rates solidly in the 3’s.

Near term, borrowers looking to refinance or purchase a home should expect national surveys to begin reflecting 30yr rates solidly in the 3’s.