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.


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.


Low Interest Rates Are Not The Only Places To Save Today

Published on September 14, 2011 by

Mortgage interest rates continue to go lower and lower and we hear about it all the time. Many are unable to refinance due to lack of equity and property values in their homes or their credit scores have taken a dip due to the poor economy. Unless you have a VA Home Loan that is, with a VA Loan you don't need any equity or minimum credit score so if you have a VA Home Loan then you should contact the Best VA Loan Specialist's in the country and find out how much money you could save today. Call toll free for a no obligation loan comparison (866) 825-6261.

In addition to the low mortgage interest rates there are other places to look for savings in such a difficult economy with the rates low in every category in addition to mortgages. NBC's The Today Show aired a short piece with a few additional ways you could capitalize on during the slow economy.

  • Refinance your vehicles while rates are low
  • Transfer debts to low teaser rate offers
  • Transfer savings to online banks that pay higher interest rates

Take a look at you finances and see if there is an opportunity for you to save money on lower interest rates but also you may be able to earn more by being a bit more savvy with your money. Every penny counts in this economy and many of the ideas are very simple and easy.

If you have a mortgage you should contact a loan officer today and see if there is an opportunity for you to capitalize on regardless of what type of mortgage you may have. All mortgage interest rates are at all-time lows and often it's where you will see the biggest savings. Many that refinance are able to save hundreds of dollars every single month and ultimately they all save thousands of dollars over the life of their loan. Call now for a no obligation loan consultation toll free (866) 825-6261.


Mortgage Rates Compared To The Fed Funds Rate

Published on August 19, 2011 by

Fed Funds rate vs Mortgage Rates 2000-2011

Often times we hear the Fed are lower or raising the Fed Funds Rate and believe that it is the same thing as the mortgage interest rates. While the interest rates are correlated they are not always consistently the same. So if the Fed Funds Rate moves in one direction or another it doesn’t necessarily mean that interest rates will follow.

Last week the Federal Open Market Committee decided to leave the Fed Funds Rate in a target range of zero percent. This does not mean that interest rates can’t go any lower then where they currently are as evidenced by interest rates continuing to go lower and lower and currently breaking all-time low records.

The graph to the right shows a visual of how interest rates have differed from the Fed Funds Rate for the last few years. If you look at that you will see that mortgage interest rates can still come down quite a bit. Many are expecting interest rates to stay low for the next few years but remember that when interest rates do go up they will not move slowly.

The spread between the interest rates and the Fed Funds Rate is on the higher end of the scale. This is interesting since it moves up and down based on economic expectations. The economy is in very poor shape, take a look at the stock market if you disagree. The economy is poor now but the high spread indicates there is high expectations while the Fed believes otherwise. Interest rates based on the economic expectations should continue to go lower and lower over the next couple of years until the economy shows some promise and improvement.

With the record low interest rates of today you are seeing a huge wave of refinances taking place. This would be much larger if loan guidelines allowed for little or negative equity in the homes or employment flexibility. The only loan available today that combats that and makes refinancing easy is a VA Home Loan. You can refinance your VA Loan today even if you owe more then the home is worth today. If you have questions contact the nation’s number one VA Loan Originators at (800) 485-2332 or go online to www.VAmortgageLeader.com

In a Tough Economy Be Aware of Your Free Perks on Credit Cards

Published on August 18, 2011 by

During a tough economy we are all looking for ways to save money. One of the nice things that many are not aware of are the perks and benefits they get with their credit cards. It’s not only high end credit cards that offer valuable savings. Watch this short clip and learn from this two-and-a-half minute piece with NBC’s The Today Show.┬áIn the interview, you’ll hear about “built-in” perks offered by most credit cards and ways by which you can save on everyday goods and services.

Check your credit cards and you may have the following common savings:

  • Automatic trip cancellation protection and car rental insurance.
  • Discount admission to concerts and museums; free shipping from overseas.
  • Price protection against a drop in price; insurance against theft; extended warranties.

During this time people will gripe about high interest rates on credit cards and the numerous fees but keep in mind that they do come with convenience and perks that can be very valuable to anyone.

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.


What Did The Federal Reserve Say and What Does It Mean?

Published on June 22, 2011 by

Putting the FOMC statement in plain English

Yesterday the Federal Open Market Committee (FOMC) kept the Fed Funds Rate unchanged and it remains at a range of 0-.25 percent. Maybe the more significant news is not that they kept it unchanged but that the vote was unanimous at ten to zero.

The FOMC shared with us that the economy is recovering at a slower then expected and frustratingly slow pace. Job creation is slow and today there was the news that unemployment claims were much higher then expected.

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For some reason with all of the negative economic news you continue to have reports that consumers and business spending or investments are increasing.

The big news was that the Feds are planning to end the $600 billion pledge to bond markets on June 30 as well as leave the Fed Funds Rate near zero for quite some time. All of the information released and mortgage interest rates remained mostly unchanged and still easing towards going lower. If you have any questions about how this news may make a difference in your budget simply contact a loan officer. Whether you purchase or refinance your first step should always be to your loan officer.

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Fed Minutes Indicate Rising Interest Rates Shortly

Published on May 19, 2011 by

FOMC Meeting Minutes

The Feds released their minutes from the recent April meeting. The Federal Open Market Committee (FOMC) released their information and the markets responded immediately by raising rates an eighth of a percent.

The minutes that were released for the previous meeting is not the same thing as the press release that happens right after the meeting. The minutes are much more detailed and leave a lot of language to be interpreted. The press release is very general and vague where the minutes has all the details of the meeting.

Below you will find some of the details of what the FOMC discussed:

  • On inflation : Higher levels are “transitory”; will level-off with commodity prices
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  • On housing : The market remains depressed. “Vacant properties” are harming construction.
  • On stimulus : The Fed will stick to its $600 billion support plan

One of the biggest changes in this meeting as compared to the previous meetings for the past couple of years is the talk of an exit strategy for the support they have provided the market with during this economic and housing crisis. Nothing was determined or agreed upon but the talk is happening and we will likely see some changes in policy in the near future.

Experts are anticipating that there will be a gradual restriction of the economy over the next 12 months. The mortgage interest rates have recently been going lower providing those that did not refinance previously a second chance to get that taken care of. If that may be you simply call a loan officer today for a free consultation. The requirements for a loan have also eased a bit. Currently mortgage interest rates are at their lowest levels of the year thus far.

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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.