The Fed plans to reduce the amount of mortgage-backed securities it owns, and reversing its intervention in mortgage markets, so expect rates to trend upward.
Mortgage rates might be volatile in June. A graph of them may resemble the cutting side of a handsaw, with sharp daily ups and downs. I predict that the average rate on a 30-year mortgage will be higher in the last week of June than in the last week of May.
I’m not brimming with confidence in this forecast. One source of uncertainty arises in the middle of the month, when the Federal Reserve meets to hash out monetary policy. As of late May, financial markets were expecting the Fed to raise the overnight federal funds rate by half a percentage point on June 15.
Government intervention was responsible for that era of steady mortgage rates. The Federal Reserve accomplished it by buying billions of dollars’ worth of mortgage-backed securities every month. This meant that lenders knew they would easily find investors to buy the mortgages they underwrote: If private investors didn’t want them, the Fed would buy them.
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