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Aviano Mortgage News for 11.3.14

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Blog by Doug Ingersoll | November 3rd, 2014

Mortgage news from Stuart Crawford at V.I.P. Mortgage:

The most closely watched economic news last week was Wednesday's Fed meeting.  The FOMC statement was a little more upbeat about the economy than expected, as the Fed upgraded its assessment of the performance of the labor market.  This was unfavorable for mortgage rates, but the reaction was small, and mortgage rates ended the week just a little higher.

As widely expected, the Fed announced that its Treasury and mortgage-backed security (MBS) purchases will conclude at the end of this month, and there was little reaction. Over the last few years, these bond purchases, described as quantitative easing (QE), helped push mortgage rates down to the lowest levels in decades.  The Fed became the eventual investor in the majority of mortgages originated during the bond purchase program, and the Fed's balance sheet expanded to roughly $4.4 trillion from less than $1.0 trillion in 2007. 

The true market reaction to the end of quantitative easing took place way back in May of last year when the Fed first indicated that it was going to gradually wind down the program.  That caused mortgage rates to increase from historic lows.  Since the announcement, the tapering has taken place at the anticipated pace with little additional impact. Though, at some point Fed officials will begin to reduce the size of their MBS holdings.  When the Fed makes that announcement, mortgage rates could be affected.

The Gross Domestic Product (GDP) report released last week showed growth at an annual rate of 3.5% during the third quarter, exceeding the consensus forecast of 3.0%.  The unexpected strength was mostly in areas such as defense spending and exports which are unlikely to maintain the same elevated levels in future quarters.  The key components of business investment and consumer spending grew at a slower pace than during the second quarter.  Because the details painted a slightly less positive picture than the headline figure, the GDP data had little impact on mortgage rates.

This week, the important monthly Employment report will be released on Friday.  As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month.  In addition, there will be a European Central Bank (ECB) meeting on Thursday.  With the recent weak data in Europe, there is growing pressure on the ECB to add more stimulus, and the ECB announcement could affect our country’s mortgage rates.

Stuart can be reached at 480.553.8482.