QE2 And Exploding Mortgage Rates

Note from Doug Short: The charts below include the latest data from Freddie Mac’s Weekly Primary Mortgage Market Survey. As I post this, the Bankrate.com overnight average for the 30-year fixed is 5.19% — three dozen basis points higher than Freddie Mac’s weekly average.

How will we know if the new round of quantitative easing is a success? An early sign will be that a variety of rates will fall — at least until the economy reaches liftoff, which probably means sustained real GDP north of 3.3% (the long-term GDP average). I’m already tracking Treasury yields on a regular basis (Treasury Yield Snapshot). Spreads are widening, which should be pleasing to the Fed, but the rising yields at the short end are probably not the Fed’s intention.

Another rate to watch is the 30-year fixed mortgage. Here is a chart I’ll be updating weekly to monitor progress. I’ve also included the Core CPI (the Consumer Price Index excluding food and energy) to help us evaluate the changes in the mortgage rate relative to the broader economy. Lower mortgage rates should in theory benefit the housing market and boost the broader economy.


For a bit of historical perspective, here’s look at 30-year fixed mortgage rate since 1971, courtesy of weekly data from Freddie Mac.



This post previously appeared at DShort.com >

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