A financial analyst explains how the Federal Reserve's bond-buying decisions and geopolitical events like bombings in Afghanistan shape mortgage rates. When investors get nervous about world events, they move money into safer assets, which can actually lower mortgage rates in the short term.
In what would normally be bad news for mortgage rates, multiple Federal Reserve members today talked about how they wanted to start tapering off their bond buying. Right now, the Fed is propping up the economy by buying $120 billion a month in bonds. When they start tapering, mortgage rates will start going up. They want to start doing that next month, potentially. So the Fed whispered scary things to the mortgage world, but that was all overshadowed or balanced out by the multiple bombings in Afghanistan. Unfortunately, today, that scares investors in general, and investors are jumping into bonds because it's a safer investment. So the investors themselves are organically propping the market up, keeping rates balanced.
