Last week the Fed Chairman Jerome Powell made a speech that signaled new policy for the Federal Reserve. They do not plan to tighten monetary policy for a long time – that could keep mortgage rates low for years. The concern is the economic recovery post covid-19.
For many years the Fed has had two goals- to keep inflation around 2% per year and to keep employment high and unemployment low. Overall they have done a good job – until 2020 and covid-19. Unemployment jumped to 14.7% earlier this year. Unemployment is coming down – as of July it was at 10.2%. Because of the concern about employment, the Fed has had to adjust it’s policies in order to meet the 2% inflation and high unemployment. This means that the Fed will continue to implement economic stimulus packages to keep the economy moving along.
While the Fed doesn’t set mortgage rates, their moves do direct the overall direction of the economy. Mortgage rates are determined by supply and demand in the secondary market. Normally the Fed has no say in that market, however recently the Fed has been buying mortgage backed securities and that has helped keep mortgage rates lower.
What does all this mean for you? Are you thinking about buying a home but need to wait a bit? It sounds like rates will stay low into 2021 and maybe into 2022!! However this doesn’t mean that we will continue to see rates as low as they are now forever! If you are thinking about refinancing, it’s a great time! Home prices seem to be going up partly due to lack of inventory so if you are thinking about buying, now is also a great time. As home prices go up, the lower interest rate will help your payment but not as much as it will today!! For those that need to wait, at least it sounds like you will also get the low rates!!
Leslie Vanderwerf, NMLS ID#335509, Cross Country Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
