Last week, in testimony to the Joint Economic Committee of U.S. Congress, Federal Reserve Chairman Bernanke sent a mixed message about the continuation of QE3. Through QE3, the Feds have been purchasing $85 billion of bonds each month in order to help the economy by keeping interest rates low, including mortgage rates. Mortgage rates became erratic over the past week as markets reacted to the Feds remarks.

According to Bernanke, the Feds' monetary policy during the economic environment present at this time has significant benefits. He stated that although the job market remains weak overall, economic growth has maintained a moderate pace this year and that employment conditions have shown some improvement. In addition, he stated that the central bank could, in the near future at one of its next meetings, scale back its monthly $85 billion bond buying if the data shows that the economy is continuing to move forward.

The latest FOMC meeting meeting minutes were also released last week and showed that monthly bond purchases may increase or slow down depending on what changes take place in the labor market and inflation. The Feds pledged to keep the target interest rate near zero as long as unemployment remains above 6.5% and the inflation outlook does not exceed 2.5%. Several Fed officials stated that they would be willing to taper bond purchases as early as the next scheduled meeting on June 17 and 18 provided data indicates strong and sustained economic growth.

For consumers, the scaling back of QE3 could mean that mortgage rates may begin to increase. No one knows for certain how this will affect the economy and rates, however, it should be a warning to consumers who have been sitting back waiting for rates to fall lower. Many consumers have already waited to purchase a home only to see home prices rise rapidly and inventory fall. This has once again led to bidding wars which is pushing many home buyers out of the market place. According to the S&P/Case-Shiller index of property values, homes prices rose 10.9% to a five year high from the March 2012 to March 2013.

Many existing homeowners have been waiting for lower rates before refinancing instead of settling for the record interest rates that have been available for the past year. A large amount homeowners are still eligible for a HARP refinance, however, it is time to make a decision before the tables turn. With home prices rising and the possibility of rates increasing, the benefits of a HARP loan may not be around even though the expiration of the program is set for the end of 2015.

Any change to QE3 can have an major affect on all mortgage rates, including those for FHA mortgages and jumbo loans. Luxury home buyers have benefited from QE3 since jumbo loan rates are priced slightly higher than conventional rates. In fact, the jumbo loan market has been on the upswing for over a year in areas such as Denver, Colorado and high cost locations in California.

After a volatile week for mortgage rates, the Fed's Rosengren made a statement indicating that the labor market is still not strong enough to end bond purchases by the Fed. How any change in QE3 will affect markets, the overall economy and rates is unknown at this time. This week's market movements were just an indication of what might come to be. Any consequences from changes to QE3 is something that only time will tell after it has been done. Until it happens, the latest message from the central bank should be enough to get consumers to move on their mortgage plans now while rates are still hovering at record lows before it is too late.

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