What agency's actions can affect mortgage costs and supply?

The Federal Reserve Board plays a critical role in influencing mortgage costs and supply through its monetary policy decisions. One of the key tools the Federal Reserve uses is the manipulation of interest rates. By adjusting the federal funds rate, which is the interest rate at which banks lend to each other, the Federal Reserve indirectly influences the overall level of interest rates in the economy, including those for mortgage loans.

When the Federal Reserve lowers interest rates, borrowing costs decline, making it more affordable for consumers to take out mortgages. This can lead to an increase in demand for housing as more people are able to finance home purchases. Conversely, when the Federal Reserve raises interest rates, the cost of borrowing increases, which can dampen demand for mortgages and slow down the housing market.

Additionally, the Federal Reserve also engages in open market operations, such as buying and selling government securities, which can further impact the liquidity in the market and the availability of credit for mortgage lending. Through these actions, the Federal Reserve essentially controls the flow of money available for lending, thereby directly influencing mortgage costs and supply in the housing market.