The quick answer is that the U.S. economy, and other economies around the world are doing better than expected. But more on that later. For now, let’s look at the U.S.

The role of the Federal Reserve of the United States is to help provide stability to our banking system, and the economy in general. “The Fed” carries out its actions through one segment of its organization, and much of the attention over the last week surrounded the latest meeting of this Federal Open Market Committee. And while, in general, economic news hasn’t resulted in much interest rate movement, the actions of and the rhetoric by the Federal Reserve can move bond and stock markets, and therefore interest rates, including mortgage rates. And our Orion AEs, and our valued brokers, are right on top of it.

As expected, no changes to monetary policy were made. But the Committee did say that scaling back its asset purchases might soon be justified. The Federal Reserve has been purchasing $40 billion of Agency (Ginnie and conventional) mortgage-backed securities since July 2020 the necessity of which has been called into question given that the housing market has been one of the bright spots of the recovery following the COVID-induced recession. Low mortgage rates, combined with a shift in consumer demand for more livable spaces, have significantly driven up home prices in some parts of the country where Orion lends, exasperating affordability issues as the average existing home price has risen to $356,700.

Yes, there are continued challenges that the recent upswing in COVID cases present. But those challenges do not appear to be the economy-crushing headwinds they were when the pandemic began. All rates moved higher last week, primarily because world-wide economic news indicates that things are improving given the lack of headwinds. The fact that the Fed is considering scaling back (“tapering”) on its purchases showed the market that we are not in dire straits, and that sentiment translated into slightly higher rates. Orion’s brokers are telling borrowers that this could be an issue moving forward.

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