Interest Rates STILL Rock!

Mortgage interest rates are near unchanged today after the biggest one day rally since August of 2011.

Yesterday, the Federal Reserve unexpectedly delayed tapering of its Bond purchase program as Fed Chairman Bernanke said that the economy still isn’t strong enough to begin easing back on QE III.

Like most, we thought there would be tapering because it was so telegraphed by many different sources, etc. – but when you consider the weak economic numbers of late and inflation non-existent…it really is not a surprise to see the Fed continue underwriting the economic recovery.

Stocks also had an enormous trading day, leaving the Dow (15,676) and the S&P 500 (1,725) at record high closing levels.

In his press conference, Mr. Bernanke said that tapering could come towards the end of the year, but for now, the Fed will continue to purchase $45B per month in Treasuries and $40B in Mortgage Bonds. The Fed will also maintain its existing policy of reinvesting principal payments from its holdings of agency debt and agency Mortgage-Backed Securities in agency Mortgage-Backed Securities and of rolling over maturing Treasury securities at auction.

Here are some of the Fed’s projections:

  • Growth between 2% and 2.3% this year, down from 2.3% to 2.6%.
  • Unemployment to fall to between 6.4% and 6.8% in 2014, between 5.9% and 6.2% in 2015 and between 5.4% and 5.9% in 2016.
  • Inflation for this year should fall between 1.2% and 1.3%, more than the forecast in June of 0.8% to 1.2% and the Fed doesn’t see it getting back to 2% until next year.

In the “in case you didn’t already know department”, Dow Jones reported this morning that the Fannie Mae current coupon MBS rate “drives consumer mortgage rates”. No, the 10-Year Note doesn’t determine interest rates.

What does this mean for you? GREAT NEWS FOR INTEREST RATES!!  Don’t get too excited though, don’t start quoting 3.25% again – BUT, this is certainly a great sign!

If you already have a great relationship with one of our Regional Home Mortgage loan officers, thank you for supporting us and continuing to do so. We appreciate your business and the confidence you have placed in us. Please let your favorite RHM loan officer know how best to continue to serve your financing needs.