The Federal Reserve had their two day meeting this week. No one really expected interest rates to change, but everyone was waiting for the post-meeting statement.
A quick summary of the meeting is that the Fed is not going to change the benchmark short term interest rates, indicating that they will keep short term rates low for an extended period of time. That's the good news.
The second part and more important is that they didn't comment or change their status on the mortgage backed securities purchase program. Right now the Fed is scheduled to finish purchasing mortgage backed securities the end of the first quarter of 2010. This program has kept interest rates artificially low for the last few months. With this program ending, we are expecting interest rates to increase slowly. How much will depend on how the mortgage market reacts to inflationary news and credit auctions that the Treasury Department is holding, along with other economic news.
Wednesday there was a five year note auction that was bid very well and also news that December New Home Sales were down 7.6%. Both of those were reports that the mortgage market liked, however the Fed meeting statement hurt the mortgage market and we saw mortgage prices drop. If prices drop, interest rates increase. Some lenders increased rates Wednesday afternoon and I am expecting that rates will be up slightly on Thursday.
As we get closer to the end of March, we will probably see rates higher than they are now – no one knows exactly how high. If you are thinking about buying and are concerned about rates – now is the time to find a new home! Plus the first time and move- up homebuyer stimulus ends with purchase agreements written on April 30th!
