The Fed will end its Treasury and MBS purchases next month, but the impact on mortgage rates likely will be small. Over the last few years, these bond purchases, known as quantitative easing, helped push mortgage rates down to the lowest levels in decades. Mortgage rates then moved off their historic lows in May of last year when the Fed unexpectedly announced that it would soon taper the bond purchases. Since then, the decreases in monthly purchases have been anticipated far in advance by investors, causing little market reaction.   As a result of quantitative easing, the Fed was the eventual investor in the majority of all mortgages originated during the bond purchase program. The Treasury and MBS purchases have caused the Fed’s balance sheet to expand to roughly $4.4 trillion dollars from less than $1.0 trillion in 2007. While the Fed will no longer purchase additional bonds, it will hold the size of its portfolio steady by reinvesting maturing securities. Eventually, though, Fed officials intend to reduce their holdings of MBS. Investors will be looking for hints about the timing for the Fed to begin to shrink its portfolio and for the pace at which it will occur. The [...]