The Federal Reserve met this week and as expected left interest rates alone. They did say that the economic growth is showing signs of improvement, but at a very slow pace. They also announced that they will extend the direct purchase of Treasury debt obligations and mortgage-backed securities to the end of October rather than September as many analyst's had expected.
As the Fed stops buying Treasury debt and mortgage backed securities, we will probably see mortgage investors increase rates. The Fed has kept mortgage interest rates artificially low to help the economy recover. At this point they are saying they expect to keep the bank lending rate near zero for an extended period of time. As long as inflation stays steady, it will allow the Fed to keep that rate low.
The Fed is also debating on ending some of it's programs to help the economy as it sees signs that the economy is growing. Factory activity is growing, home sales are increasing – although much of the activity is people picking up bargain priced foreclosures. Companies appear to be cutting few employees. Some financial stresses are easing, but lending is not at flowing normally and financial markets aren't back yet.
As the Fed ends some of it's programs, rates will start to increase. No one knows how much or how fast, but we do know that right now rates are definitely artificially low to help jump start the economy.
"Despite all the challenges with the economy, 83% of Americans still believe buying a home is a good financial decision and 3/4 of those surveyed believe that now is a good time to buy a home. In fact 1/3 of renters are thinking about buying a home now more than they were a year ago. " Source: National Association of Realtors.
Leslie Vanderwerf, Advisors Mortgage - lvanderwerf@advisorsmtg.com – Website
