< Back to My Blog

Good News for the Economy = Bad News for Rates

December 11, 2013 4:24 pm

The economy is improving. As an example, the latest employment report showed that the unemployment rate hit a five-year low. We must realize that, as the economic news gets better, the government will consider whether or not to continue the programs they put in place to stimulate the economy. One such program is the Fed’s purchasing of assets which has led to historically low long-term mortgage rates. Analysts at Capital Economics noted in a recent HousingWire article: "The 203,000 increase in November's non-farm payrolls, along with the drop in the unemployment rate to a five-year low of 7.0%, gives the Fed all the evidence it needs to begin tapering its asset purchases at the next FOMC meeting later this month." Whether such ‘tapering’ occurs this month or early next year is questionable. The fact that mortgage rates will spike when it does occur is more a guarantee. Here are the thoughts of a few Fed presidents regarding whether it is in fact time to cut back on this stimulus program: