"Vishal Garg, CEO of digital lender Better.com, said in an email interview with HousingWire that it's a big deal for spreads to compress as the Fed has yet to reach a neutral policy rate despite a string of small cuts that stretch back more than a year. We've already started seeing a pickup in consumer engagement and lock volume at Better.com as rates have moved lower, Garg said."
"The central bank began rolling over its principal payments from its Treasury securities holdings that matured in October and November beyond a monthly cap of $5 billion. And it's now reinvesting principal payments from its portfolio of agency debt and agency mortgage-backed securities (MBS) received during the same two months that exceed $35 billion per month. The Fed's decision to end QT and begin reinvesting MBS proceeds is a meaningful tailwind for the mortgage market, Garg said."
Spreads between 10-year Treasury yields and 30-year mortgage rates have narrowed substantially over the past two years. The Fed has not reached a neutral policy rate despite a series of small cuts extending over more than a year. Lower mortgage rates have produced increased consumer engagement and higher lock volume at Better.com. The Fed began ending quantitative tightening by rolling over Treasury principal payments above a $5 billion monthly cap and reinvesting agency debt and agency MBS principal that exceed $35 billion per month. Fed reinvestment of MBS is providing meaningful support to mortgage pricing, particularly for conforming loans. Current spreads remain around 200–225 basis points, above a historical average near 150, and future Fed leadership changes could materially affect rates.
Read at www.housingwire.com
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