Here we go again, with the talking heads on financial news misinterpreting the impact of the Fed's actions on home loan rates.
Here's the scoop. What the Fed just announced is huge - they have committed to buy another $750B in Mortgage Backed Securities, and $300B in Treasuries.
But what does this mean and why do you care?
Their actions provide a demand for Mortgage Backed Securities, which should help keep a ceiling on home loan rates moving much higher in the foreseeable future. That's good news, for homebuyers who are seeing the bargains out there and understanding that now is the time to act. Good news for those who are ready to refinance too.
But an important distinction - this does not mean rates may move significantly lower. Depending on exactly which coupons the Fed purchases when they go shopping for Mortgage Backed Securities, their actions may keep a lid on rates, but not push them very much lower. And based on what they've been buying since the beginning of this year when they started their purchasing program - that is exactly how it has played out.
Present home loan rates are within inches of historic lows. What is keeping you on the sidelines from acting now to refinance and get some dollars back into your own pocket, where they belong - or moving forward to buy the home of your dreams, while it is still on sale?
If you have questions - call me. You know there's no pressure, but let's discuss options and see if there is something we should be looking at to improve your situation.
The Federal Reserve constantly evaluates the US economy and, when necessary, takes steps to address inflationary concerns and avoid economic recession or depression. The mass media, in turn, reacts by providing a wide range of opinions and interpretations of the Fed's monetary policy. This can make it very difficult for consumers to decipher how such actions will influence interest rates in general and mortgages in particular. 