Fed Minutes Help Push Mortgage Rates To 4-Month High

Posted: November 26, 2010 in FOMC Minutes
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FOMC November 2010 MinutesThe Federal Reserve released its November 2-3, 2010 meeting minutes Tuesday afternoon. Mortgage rates in California have been on the move since.

The Fed Minutes is a comprehensive review of Federal Open Market Committee meetings; a detailed look at the debates and discussions that shape our country’s monetary policy. The report is published 3 weeks to-the-day after the FOMC adjourns.

Fed Minutes add depth to the briefer, more well-known “statement” to the markets which is issued upon adjournment. As a comparison:

If the Fed Statement is the executive summary, the Fed Minutes is the novel. And, the extra words matter.

When the Federal Reserve publishes its minutes, it gives clues about the groups next policy-making steps.  For example, in November’s minutes, it’s revealed that the Fed discussed setting inflation targets for the economy; holding occasional policy briefings for the press; and, working to set yields on instruments such as the 10-year Treasury note.

In addition, the Federal Reserve acknowledged a video conference hosted October 15, the second such “unannounced” meeting of the year.  The other was May 9, 2010.

Bond markets have not taken kindly to the Fed Minutes. The minutes show a propensity toward Fed “action”, most of which markets believe to be inflationary. Inflation leads to higher mortgage rates and that’s exactly what we’ve seen.

As compared to Tuesday morning, mortgage applicants in Peoria are finding conforming and FHA mortgage rates to be higher by as much as 0.375 percent. In “real life” terms, assuming a 30-year term, that’s an extra $264 in annual mortgage payments per $100,000 borrowed.

If you’re still rate shopping, consider getting locked today. As a result of the recent shift, mortgage rates are now at a 4-month high.

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