What Does The Federal Reserve Statement Mean

Published on September 21, 2011 by

Putting the FOMC statement in plain EnglishThe Federal Reserve agreed with a majority vote to keep the Fed Funds rate unchanged. This means that they are seeing the economy as still sputtering and trying to stimulate the economy with more spending by making interest rates lower or keeping them low.

The economy continues to stay in the dumps and the official language from the Feds statement are detailed below:

  1. Economic growth “remains slow”
  2. Unemployment rates “remain elevated”
  3. The housing sector “remains depressed”

Not all signs indicate that the economy is in poor shape but until you start seeing jobs created and more spending it is very unlikely that you will see too much change in the economy and the housing sector specifically.

If you are not part of “main street” then consider yourself fortunate and start taking advantage of the many opportunities available to you. If you are not considered rich you may want to tighten your belt and prepare for a lengthy rough patch prior to recovery.

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Operation Twist and How It Impacts Mortgage Interest Rates

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Comparing 30-year fixed to Fed Funds Rate (1990-2011)

The Fed Funds Rate is not always going to parallel with mortgage interest rates. You can see clearly in the graph above how the spread between interest rates and the Fed Fund Rate will change over time. The Fed met today and announced Operation Twist.

Keep in mind that the mortgage interest rates are not set by the Feds. Rather the best way to keep an eye on what interest rates are doing is to watch the price of mortgage-backed bonds. There is very little consistency between the Fed Funds Rate and the mortgage interest rates where there they have been separated by as much as 5.29 percent, and have been as close as 0.52 percent.

Currently the spread/difference is 4% which means that there is plenty of room for the interest rates to move both up and down. Although based on the economy and the announcements from Ben Bernanke you could expect interest rates to remain low until the middle of 2013.

Interest rates continue to stay at record breaking lows. If you are in a position to purchase or refinance your home then you are very fortunate and will realize significant savings. With VA Home Loans the veterans are saving thousands of dollars with a simple streamline that lowers their interest rate and it takes very little effort to qualify. If you have a VA Loan and have questions simply contact a VA Loan Specialist for a free consultation (866) 825-6261.

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Looking at Mortgage Rates This Week : September 12, 2011

Published on September 12, 2011 by

Eurozone trouble aids mortgage rates

Mortgage interest rates this past week were slightly improved. The many concerns around the world including the continuing financial concerns in Europe have continued to push interest rates lower.

There is not a lot of news that we haven't heard about for months now. All of the concern is real as we continue to see interest rates go lower and lower and continue to break records for all-time lows.

Rates were expected to rise with the economic stimulus coming from the Feds and Congress. Neither of the two parties provided too much information or stimulus which was a disappointment and interest rates continue to stay extremely low.

Mortgage interest rates this week started slightly lower again and there isn't much news coming out this week so you will likely see interest rates continue to trend down. As the global financial concerns continue to fester you will see interest rates continue to drop. If you see a resolution to the concerns in the Eurozone you will likely see interest rates go higher.

If you're fortunate enough to be in a position to capitalize on the poor economy and the extremely low interest rates then contact a loan officer immediately. You can get a free no obligation consultation by simply calling toll free (866) 825-6261 and find out how much money you could be saving on a refinance or increase your purchase power today.

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Looking At Mortgage Rates This Week : September 6, 2011

Published on September 6, 2011 by

Eurozone debt concerns resurface

Interest rates continue to be very volatile with the poor economy happening globally. The growing concerns in Europe have helped to continue to push mortgage interest rates lower recently. Additionally you a job report that was horrible.

Interest rates will change independently as well. Just because the 30 year fixed rate goes lower it does not necessarily mean that the 15 year or the 5 year ARM rates will drop accordingly.

The 5-year ARM has been hitting all-time lows and it continues to do so. Although the 30 year fixed remained level it continued to go lower. The spread between the ARM and fixed rates has been extremely high and they continue to show a wider spread.

There is very little economic news coming out this week although there will be two speeches though one by Fed Chairman Ben Bernanke and also the United States President Barack Obama. The interest rates will continue to be quite volatile and very interesting. The end result is simply that interest rates are very low and will likely continue to go down further. Even if they don’t go lower they are extremely low and present a great opportunity to refinance or purchase a home at this time.

Possible Fed Stimulus in August

Published on August 31, 2011 by

FOMC Minutes August 2011

The Federal Reserve meets eight times a year and after each meeting they produce  a brief statement that is shared immediately after the meeting and then they share the Minutes a few weeks later. The statement provides the highlights of the meeting and the Minutes provides all of the details.

The detailed Minutes from the last Fed meeting on August 9, 2011 was released today. The disappointing part is that the minutes have not revealed any additional insights or information.

For those that have plenty of time on their hands they can read the minutes and/or the highlights here:

  • On growth : Economic growth had been slower than the committee expected
  • On housing : The market “remains depressed”. Underwriting standards are “tight”.
  • On rates : The Fed Funds Rate will remain low until mid-2013

The next time the Fed is scheduled to meet is September 20-21. Fed Chairman Ben Bernanke has extended the meeting to two days instead of the normal one day. It is widely anticipated that the extra day of meeting will be used to discuss additional and new forms to stimulate the economy.

What Does The Federal Reserve Statement Mean?

Published on August 10, 2011 by

Putting the FOMC statement in plain English

Yesterday the Federal Open Market Committee (FOMC) met and voted to leave the Fed Funds Rate unchanged. This is not surprising but what is surprising and maybe shocking is that the vote was not unanimous, in fact the vote was 7-3. It has been over 10 years since the FOMC has met and had as many as three not agreeing with the majority.

In the notes and press release following the meeting there was a few highlights that showcased how poorly the economy is doing:

  1. Growth would be better if it was at least a “snails pace”
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  3. Labor markets are non existent at this time
  4. Household spending has peaked and may turn down

They also mentioned the housing market is insignificant when you are looking for something positive. The housing market is just another indication that the economy may be sputtering for quite some time and some are saying well into 2013.

There was also talk about inflation, and that it is not really a concern at this time which is another reason why you may see interest rates continue to stay low. So, if you qualify for a loan whether it's a purchase or a refinance then now is a great time. If you don't qualify due to credit it would appear as if you have some time to work on it and still capitalize on the rates.

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Looking at Mortgage Rates This Week: June 13, 2011

Published on June 13, 2011 by

Housing Starts 2009-2011

Interest rates were quite volatile this past week as they started the week continuing the trend of lower rates but by the end of the week the interest rates were higher then the beginning of the week. It’s quite a surprise that interest rates ended higher last week although it has been very uncommon over the past couple of months. Freddie Mac is reporting that mortgage interest rates have dropped .42%. If you aren’t a math wiz or financial guru then the drop by .42% may mean very little to you. To make it easy it equals a monthly savings of $25.24 per $100,000 borrowed.

The economy continues to sputter and although there are many out there saying it is improving there are just as many or more that will be able to argue that things are continuing to get worse. Last week there were two members of the Federal Reserve consisting of the chairman and the president both voicing their frustrations with the recovery.

The economy is weak enough that Ben Bernanke the Chairman of the Federal Reserve has talked of interest rates staying low through the end of the year. The markets on Wall Street also are showing worries and concerns as the Dow Jones Industrial

Economic weakness tends to promote a low mortgage rate environment as equity markets sell off and investors seek safety of principal. Indeed, the Dow Jones Industrial Average fell for the 6th straight week, its longest losing streak since 2002.

There is not a lot of news this week that is really valuable but there are a few items that Wall Street may take some actions and decisions on that include:

  • Tuesday : Producer Price Index, Retail Sales
  • Wednesday : Consumer Price Index
  • Thursday : Housing Starts
  • Friday : Consumer Sentiment

While the number of home sales and the market in general has been very slow and weak, keep in mind that home affordability has never been so high. With the low rates expected through the end of the year perhaps the buying season will extend beyond the summer this year. If you have any questions about what opportunities may be available to you whether you purchase or refinance simply contact a loan officer for a free consultation.

What Does The Federal Reserve Statement Mean

Published on April 28, 2011 by

Putting the FOMC statement in plain English

Yesterday the Federal Open Market Committee (FOMC) ended it's third meeting of the year and had an immediate release where they kept the Fed Funds Rate unchanged. The vote among the FOMC was unanimous at 10 – 0 to keep the rate unchanged.

There was notes mentioned in the brief press release, the FOMC noted that the economy is recovering at a moderate pace with labor markets also improving and household spending continues to improve but the housing sector continues to be “depressed”. What does all of this language mean? Simply contact your loan officer and have them explain the trends and volatility in the interest rates right now so you can make an informed decision regarding your interest rate.

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The FOMC mentions inflation and also notes that it's expected. Additionally the FOMC will keep it's $600 billion bond market support package (QE2). The language in the notes from the meeting that were released seem to suggest that there maybe another support package created at the end of the 2nd quarter this year if they think the economy still needs additional support.

The new information didn't cause a change in interest rates like many anticipated it would depending on the language. Interest rates continue to remain volatile and anyone looking to purchase or refinance a home this year would benefit from visiting with a loan officer to make an informed decision.

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Fed Meeting Will Impact Mortgage Rates And Home Affordability

Published on April 26, 2011 by

Fed Funds Rate and Mortgage Rates 1990-2011

Federal Open Market Committee (FOMC) started the third meeting of the year today. The Fed will meet eight times a year and today they start a two-day meeting.

The FOMC is comprised of a 12 person committee within the Federal Reserve. The group is led by the Fed Chairman who is currently Ben Bernanke and they impact the nation's monetary policy greatly. Often times the average consumer will confuse the Fed Funds Rate for what they think the mortgage interest rates should be. The two rates are very different and there is no direct relationship between the two rates.

The difference today between the Fed Funds Rate and the average standard, 30-year fixed rate mortgage is 4.625 percent. This difference continues to increase and decrease on a daily basis. Expect to see some change when the FOMC meeting ends and they release the public statement from the meeting tomorrow.

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Everyone on Wall Street is expecting the FOMC to continue to keep the Fed Funds Rate at it's current target range of 0 – .25 percent which it has been at since December of 2008. The number is not always as important since it doesn't move too quickly. Often times the wording used surrounding the rate will have great impact on what interest rates do.

The language may include information talking more of inflation and economic growth which will be bad for interest rates but on the flip side if they withdraw the existing $600 billion bond market stimulus you will see rates fall.

Often times the hard part of buying a home is simply making adjustments according to the interest rates since they are so volatile. The rates greatly impact your purchasing power and monthly budget. If you have any questions you should reach out to your loan officer and make sure you are informed to make the best decisions going forward.

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Looking at Mortgage Rates This Week : April 25, 2011

Published on April 25, 2011 by

Federal Reserve 2-day meeting this week

Last week was a positive week for mortgage interest rates this past week. Positive housing data started the week out worse but by the end of the holiday-shortened week the rates had fallen and improved. With the holiday the markets were closed on Thursday afternoon and all day Friday. Speak with your loan officer if you missed out on the data that was recently released this past week.

Last week the Standard & Poor's issued a downgrade on U.S. debt. This move would typically end up with investors moving away from mortgage-backed bonds although for some reason this time it did the exact opposite.

Some are saying the reason for the opposite reaction is in effort to force Congress to address a rising debt-load; while others are saying the move alone should slow down inflation. What does this all mean……simply, keep in mind that both ideas are positive for mortgage interest rates and hopefully they will continue to fall.

There is a lot of information coming out this week including New Home Sales, Pending Home Sales and Consumer Confidence data and most importantly the Federal Open Market Committee is meeting for the month and this time it will be a bit different.

Usually after the FOMC meeting the press release is shared and that is all. This time they will release the press release a few hours earlier and allow time for Fed Chairman Ben Bernanke to hold a press briefing at 2:15 PM ET.

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This week will be quite exciting and volatile for mortgage interest rates with all of the data and especially the Fed Meeting. If you're floating or watching interest rates it should be fairly calm today and tomorrow and look for some activity here before the end of the week. If you have any questions simply contact your loan officer for a free and no obligation consultation.

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