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Here's why mortgage rates didn't rise in 2014

Fed's QE has a lot of negative side effects

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Most analysts and economists expected that mortgage rates would rise after the Federal Reserve indicated it would taper its purchase of mortgage-backed securities through its quantitative easing program, and rates did creep up last summer, but since then they’ve largely been flat. MarketWatch has a couple of reasons.

But when the Fed actually began purchasing fewer of these securities, mortgage rates began to fall. That’s because the tapering ended up coinciding with a reduction in mortgage originations — which means fewer mortgage-backed securities were being issued, Kiefer said.

And that’s keeping rates down.

Another reason for the supply/demand imbalance: Global investors buying mortgage-backed securities, said Dan Green, chief publishing officer of The Mortgage Reports, a mortgage blog.

“Wall Street planned for the end of QE3 in a vacuum. There was no consideration given to the health of domestic and global economies or to market-destabilizing geopolitics,” Green wrote in an email interview. “The Fed has been exiting the market exactly as forecast, but not as quickly as global investors have joined. Demand for mortgage-backed securities still outweighs supply, which has lowered consumer mortgage rates.”

Source: MarketWatch
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