5 November 2010 – The past week was an exciting one. First, there were the mid-term elections with all of the drama of a Mexican soap opera and the negativity of homeless curmudgeon yelling at you on an El platform. This, however, paled in comparison to the much anticipated announcement of QE or quantitative easing by the FOMC.

This move, under which the Fed will purchase $600 billion US Treasuries, is intended to provide a positive shock to the economy. The overall plan, if all goes as planned, will increase the money supply and provide downward pressure on interest rates. This should especially affect large banks, many of which hold large amounts of T-bills, who will now have more money to, at least theoretically, lend out. The hope is this will lead to wider availability of credit and, as the price of Treasuries rises, lower rates.

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We have yet to fully realize the full impact of this move, but the QE announcement definitely provided some volatility this week. The suspense was palpable as rate watchers and financial professionals anxiously awaited the details from the FOMC like teenagers waiting for the next Twilight movie and, when the specifics were announced, it was almost as horrible. The mortgage market initially reacted negatively with mortgaged back securities suffering some setbacks. By Thursday, however, the expected outcome of finally shown through with mortgage rates for Fannie Mae and Freddie Mac loans ending lower.

I am recommending that my clients closing in 7 days or less from today LOCK. For those closing more than 15 days out, I would suggest FLOATING for now with a watchful eye on the markets for the best opportunity.