Government “Tapering” Continues

Last week, the Federal Reserve, in a unanimous vote, decided to further decrease its bond purchasing. The bond purchases were the government’s stimulus package created to keep long term mortgage interest rates artificially low in order to help drive the housing market. Most experts believe that tapering will cause interest rates to increase as we move through the year.

Interest rates have remained relatively stable since the onset of the tapering in December. This is probably because the first round of increases had already been ‘priced into’ the equation last summer when rates skyrocketed by over a full percentage point just on the speculation that tapering would take place later in 2013 (See below).

However, as we move forward, most analysts believe rates will start to rise culminating in a rate close to a full percentage point higher than current rates by this time next year.