Interest on home mortgages are going down again following a meeting of the Federal Reserve. The new down trend is pushing interest rates for home loans to all time lows for both 30 and 15 year mortgages. To the shock and awe of most watching the trend, rates on home mortgages are quickly approaching the 2 percent range, a rate that hasn’t been seen in recorded loan history.
In a press release following the meeting, the central banker responded to questions saying that economic growth has moderated to a degree. Markets are improving, the labor force is getting back to work, however some stabilizing causing economic indicators to be flat which is keeping inflation rates below the Federal Reserve target rate of 2%.
Other important changes in the Fed’s earlier statement from January included the removal of the sentiment that patience is needed in regards to future changes in policy. Also, the Fed Funds Rate won’t likely go up in April as previously thought. Rates are down on today’s home loans.
FEDERAL RESERVE FUNDING HOME LOANS AT 0%!
In a 10-0, unanimous vote, The Federal Reserve marked the 51st meeting where the FOMC (Federal Open Market Committee) decided to leave rates at 0.000 percent. This extends the fiscal policy for at least six more weeks. Economists in the Federal Reserve commented on the fact that consumer spending is rising and the desire for fixed investments is growing. In spite of this, the market for housing is still sluggish.
Part of the sluggishness could be due to the fact that many Americans are unaware of the great interest rates now available. Many continue to reel from the effects of the falling economy and job losses and are just now getting back on their feet. Some still believe their homes are underwater, because they had been in the recent past due to the crash in the housing market in the last decade. Even though those events were well documented in the news, the improvements in the last couple years failed to attract as much attention.
It’s a good time for home owners and people who would like to buy a home for the first time to check into the current values. Home owners are likely to be pleasantly surprised to find their homes approaching previous values, and that they are now eligible for many attractive FHA programs that their low values excluded them from in the recent past.
Unemployment is down to its lowest figures since 2008 with an increase of over 10 million jobs reported just since 2010. The fall in unemployment resulting from the boon in job availability has made it a great time for home buyers looking to buy property. Higher employment and a stabilized inflation rate shows promise for a healthy U.S. economy that bankers and other mortgage lenders can feel confident about. Other factors that have kept inflation rates below the predicted 2% range are falling energy prices. Current inflation is closer to 1% than the previously projected 2%. The Federal Reserve stated that they believed the rates would begin to rebound back to the 2% range, but by March, the inflation rate had barely budged.
The low rates are associated with mortgage rates, one of the reasons for the currently low interest rates that continue to fall. Right now is when buyers should be thinking about taking advantage of these rates. The mortgage interest rates are at the lowest point of the current month.
RATES CONTINUE TO FALL 7 MONTHS AFTER QE3
In October 2014 the Federal Reserve announced the 3rd quantitative easing round, known as QE3. The QE3 program began in September 2013, buying over 80 billion dollars in bonds every month. These purchases were split between treasury bonds and mortgage-backed securities.
The desire was to create a rise in demand that would cause prices to fall. For Americans it meant that interest rates on mortgages would go down. That program has been a resounding success. In just a few weeks following the launch rates fell to the lowest percentage ever and home owners jumped to refinance at the new low interest.
Last year the Federal Reserve began to phase out the QE3 program. They did it slowly by reducing purchases by $10 billion per month until it was down to $0. That removed the artificial floor on interest rates, but in spite of what some thought would cause a spike in interest, rates continue to fall. Interest rates are now at historically low levels. The lowest they have been in close to two years.
The incredibly low rates have caused a stir in the market. Buyers, both foreign and domestic, of mortgage backed securities are grabbing up loans, especially those backed by the safety of products such as Fannie Mae, Freddie Mac and Ginnie Mae. Continued low inflation rates should keep investors seeking dollar-denominated assets backed by the U.S. and hold interest rates at the low rates currently being offered.
Thanks to the economic atmosphere created by the increase in economic stability, low inflation and strong securities backing, applicants for home loans are now seeing quotes in the mid-3% area along with low APR rates. The low interest and rising home values due to a stable economy, home buyers are enjoying better buying power than the beginning of 2014. That means millions of American home owners are “in the money” when refinancing at the new low rates.
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