To understand the effects of mortgage rates, we have to first understand how they work. Mortgage rates are based off of Mortgage Backed Securities.
Mortgage Backed Securities (MBS) are basically investments in mortgage loans. MBS’s represent mortgage bonds and are made up of pools of mortgages. MBS’s are traded just like stocks and their value fluctuates on a daily basis. Rates are constantly changing just like stocks. Throughout a trading day, rates are changing up and down.
In January of 2009 The Federal Reserve announced that they would buy up $500 billion dollars in Mortgage Backed Securities.
This would drive mortgages rates down, which it did. Then in March of 2009 The Fed realized that they will need to keep rates low, much longer, so…