Record Low Rates Here. Now They’re Gone.

Rates got within .125% of all-time record lows briefly Tuesday as mortgage bonds rallied a third straight day. This happened because Greek Prime Minister George Papandreou said he wanted to let his people vote on further austerity measures that are a condition of the EU’s bailout plans for weaker Eurozone countries like Greece.

Mortgage bonds (FNMA 3.5% coupon) ended down 5 basis points today—pushing rates up slightly—following this afternoon’s Fed policy statement confirming their September 21 pledge to continue supporting low rates.

The Fed isn’t doing this with new quantitative easing. They’re reinvesting proceeds from existing mortgage holdings as a strategy to keep rates low.

Nevertheless, there are rumors that the Fed may do QE3 in 2012. At today’s post-Fed meeting press conference, Bernanke kept that door open in case of emergency, but I think their existing strategies will be sufficient medium-term—and barring any global economic emergencies.

In any case, borrowers must be ready to seize low rates as they come then go just as fast—this week and every week.

The way to capture rate lows is explained in this piece I wrote for Mortgage News Daily two weeks ago. If you’re a rate shopper and you read nothing else, read this piece: How To Shop For A Mortgage.

As for Papandreou’s move, EU leaders will hold emergency talks with him in Cannes, France tonight, ahead of tomorrow’s European Central Bank meeting—the first with new ECB head Mario Draghi—and also tomorrow/Friday’s G20 summit.

The drama and resulting market volatility will continue. Stay tuned.