Fed Policy: The House that Yellen Builds

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Source: Taber Andrew Bain / Flickr

If confirmed as chair of the Federal Reserve, Janet Yellen will have the weight of the housing market sitting on her shoulders. The importance of the housing sector, already seen as a key indicator of economic recovery, was heightened after the Fed modestly began scaling back its bond-buying program.

After the Fed announced it would cut $10 billion from its $85 billion monthly purchases, which includes mortgage-backed securities, mortgage rates began to tick upwards. Following the taper, the average for 30-year fixed-rate mortgages was 4.47 percent. The number is historically low but 1.3 percent higher than what it was a year ago.

The 30-year fixed-rate mortgage started 2014 slightly higher, at 4.53 percent. The 15-year mortgage rate was higher as well, at 3.55 percent. One year ago, it was 2.64 percent. In July and August, the rates rose sharply due to speculation that the Fed was going to begin tapering. Now that the taper is here, how Yellen proceeds will be intensely scrutinized.

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