Rates are at their lowest point since August 12
Mortgage rates are hovering in the mid-4% range for conventional, fixed-rate 30-year loans following the Federal Reserve Open Market Committee’s decision yesterday not to begin to reduce its support for the mortgage bond market.
Since 2008, however, short-term rates have been near zero, which means that they can’t go lower. Yet the economy has remained weak, so the Fed has tried to gain traction with other means — mainly by buying longer-term bonds, both U.S. government debt and bonds issued by federally sponsored home-lending agencies. It’s these purchases that have kept mortgage rates so low for so long.
For the last few months, the Fed has been talking about slowing the pace of these purchases, bringing them to a complete halt by sometime next year. The Fed had said that at its September 18th meeting, it would announce whether it would begin tapering its bond purchasing program and, if so, by how much – depending on the Fed’s view of the economy. The mere talk had raised 30-year mortgage rates from below 4% to just under 5%.
The reason the Fed had been giving for ending the taper was an improved economic outlook. But on September 18, Chairmen Ben Bernake said that the Fed still feared a turn for the worse. He noted that Washington politicians are hurtling toward an impasse over government spending. “We have been overoptimistic.” The Fed is “avoiding a tightening until we can be comfortable that the economy is in fact growing the way that we want it to be growing.”
So, for now, interest rates are unlikely to continue rising and are even likely to drop a bit from recent highs. This should encourage buyers to come into the housing market through the winter.
Start now, contact a Flagstaff lender.