The Federal Reserve board met this week and voted to leave rates unchanged for the 7th meeting of this year. In their comments, they said the economic growth has slowed, household spending is increasing but is restrained due to unemployment, home values and restrictive credit. They do expect economic growth to be modest in the near term.
The Fed also highlighted strengths in the economy:
- Growth is ongoing on a national level
- Inflation levels remain exceedingly low
- Business spending is rising
The Fed said it was prepared to take additional steps to improve the economy. They didn't announce specific plans but most assume that means they may increase the bond-purchasing program in the future. When the Fed was purchasing mortgage backed securities last year, it helped keep interest rates down. Right now they are reinvesting their principal payments on securities holdings. This should help keep rates lower for an extended period of time. They may not stay this low (low 4% range for conventional and FHA 30 yr mortgages) but hopefully this will keep them lower than expected.
Because of this, we did see a small improvement in interest rates Tuesday afternoon. The Fed is expected to leave rates alone for an extended period of time. We don't know how long rates will stay where they are, but right now mortgage interest rates are fantastic. If you are thinking about buying or refinancing your home, it is an excellent time to do so!!