The unprecedented “quantitative easing” program the Federal Reserve first implemented back in September of 2008 has made a few changes over the years but the goal has always been the same: keep mortgage rates, including VA mortgage rates and others low by purchasing mortgage bonds and U.S. Treasuries. This series of purchases has kept the demand for such securities high resulting in lower rates. Yet the program is coming to an end so we should expect rates to be higher. But they’re not.
We’re currently in the middle of the end for “QEIII,” the program which purchased $85 billion in securities beginning in September 2012. Credit and stock markets alike looked for hints from the Fed when the program would come to a halt. The guessing game ended in June of last year when then Fed Chair Ben Bernanke announced a gradual “tapering” of the special program at some point in the near future. From May to late June, the 30 year mortgage rate jumped at the fastest pace in more than two decades.
Today, the $85 billion per month is now at $35 billion per month with the program expected to extinguish later this fall. But guess what? Rates are actually lower today compared to one year ago in spite of the inevitable demise. Theoretically, mortgage rates should be higher than they are now but they’re not. Instead they’re reacting to geopolitical events around the globe as investors continue to plow more funds into more secure mortgage bonds and U.S. Treasuries. The more uncertainty around the globe, the longer we can expect low mortgage rates and we could see VA mortgage rates stay within a tight range at least into 2015.