It has been more than a month since the introduction of QE3 by the Federal Reserve. It intends to purchase $40 billion of mortgaged-backed securities a month with an aim to boost employment and housing. Some expect the program to continue until the end of third quarter of 2013.
Since QE3, the mortgage interest rate has seen some easing. Immediately after the introduction of QE3, 30-year fixed mortgage rate which was at approximately 3.55 percent has gone down to around 3.39 percent according to Freddie Mac. Some expect that the rate may even fall below 3 percent fueling further refinancing. Meanwhile, the unemployment rate has dipped below 8 percent for the first time in nearly in four years.
But there are other unintended consequences of the QE3. The Feds program is buying approximately three-fifths of mortgage backed securities and the maturity stays at 30-years. As a result, income seeking investors are clamoring for Freddie Mac and Fannie Mae agency mortgage bonds. Banks including the nation’s two biggest mortgage lenders, JPMorgan Chase and Wells Fargo, are also earning more from the situation and posted earnings growth in third-quarter. The Wells Fargo mortgage originations climbed from $131 billion in the previous quarter to $139 billion in the current quarter.