Archive for the ‘Federal Reserve’ Category

Fed leaves interest rates unchanged

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At its meeting today, the Federal Reserve board voted unanimously to leave short-term interest rates unchanged despite the choppy waters some financial markets are moving through. The Fed has left the federal funds rate, currently 5.25 percent, unchanged for over a year.

This is good news for well-qualified buyers currently searching for a home, as it means the cost of financing will not likely increase in the immediate future. However as time goes by and the sub-prime meltdown continues, lenders may raise rates to maintain profit margins. If you’re shopping for a house, get a rate lock and move quickly to get your offer accepted.

Yes, we’re in a buyer’s market – but think carefully whether haggling with the sellers over a new hot water heater is really worth paying a higher interest rate over the life of your mortgage. In the worn and tired words of Larry the Cable Guy, “Git ‘er done!”

Source: Associated Press

Mortgage Rate Outlook April 2-6

Rates are likely to riseIt’s likely rates will rise this week. If you’re currently shopping for a home, ask your mortgage professional if they recommend locking your current interest rate. If you’d like personal recommendations on trustworthy, ethical mortgage pros, drop me an e-mail or give me a call (see “Contact Jay” on the bottom right panel).

Last Friday, the PCE Index was released. It showed the highest spike in consumer expenditures since last August – the rising cost of fuel most likely played a large part. This indicates inflation is on the rise. If consumers spend as much or more in April on commodities like food, electricity, and gas, it’s likely the Federal Reserve will raise the prime rate in May in an attempt to slow inflation. (To learn more about the PCE, see the post Mortgage Rate Update and Fed Primer below.)

Another factor that will play a part in the possible rise of both short and shorter-term mortgage rates is the release of the Jobs report this Friday. If this shows a sizable number of jobs were created last month, the case for hiking rates will be made even stronger.

New jobs are of course a good thing – but as the economy picks up speed, count on interest rates increasing in response.

Source Info:

“The Mortgage Market This Week” from The Bond Rate Monitor, 4/2/07

(Thanks to Chris Benfield at Century 21 Mortgage for providing the source material.)

Mortgage Rate Update and Fed Primer

Mortgage Rate Trends, 2000-2007Good news for anyone shopping for a new home – at its meeting last week, the Federal Reserve decided to leave interest rates unchanged.

The chart to the left shows mortgage rate trends since 2000. The second (below) shows rate fluctuations this month. (Click to enlarge.)

The Federal Reserve’s primary function is “to influence the availability and cost of money and credit to help promote national economic goals.” The Fed accomplishes this is by raising interest rates, lowering them, or leaving them unchanged. When rates are increased, the amount money available nationally is reduced, which in turn slows inflation. (Inflation is a side-effect of a strong economy.) When rates are cut, more money is made available which in turn stimulates the economy. 

Short-Term Mortgage Outlook March 2007 rate trend

This Friday the Personal Consumption Expenditure Index (or PCE) will be released. This monthly report compiles nation-wide data on the average increase in prices for all domestic personal consumption for the prior two months. “Domestic personal consumption” includes things like the food we buy, the energy we use to heat our homes, and the gas we put in our cars. Many analysts believe the Fed relies heavily on this report to gauge inflation, with any decision to raise or cut rates being intimately tied to it.

If the index shows the average American spent less on personal consumption over the last two months, and this trend continues until the Fed meets again on May 9th, it may resolve that inflation is in check and lower interest rates accordingly.

Source Info:

“The Mortgage Market This Week” from The Bond Rate Monitor, 3/26/07

The Federal Reserve’s website

Freddie Mac’s website

(Thanks to Chris Benfield at Century 21 Mortgage for providing a portion of the source material.)