The Fed to continue keeping mortgage rates low

The Fed just wrapped up their two day meeting and have issued their press release. Here are the tid-bits relating to keeping mortgage rates at artificially sweet and low levels.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agenc mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

As expected, there was no change to the Fed Funds rate.

If you would like to lock in a sweet and low mortgage rate for your home purchase or refinance for homes located in Washington state, please contact me.

What the Fed Said

This morning the FOMC Minutes from last months meeting and it’s causing a stir in the bond markets. The minutes reveal some members of the Committee wanting to pull back on the purchasing of mortgage backed securities by the end of this year. Mortgage interest rates are based on MBS (bonds) and the indication of no longer having the Feds hand in keeping mortgage rates artificially low is causing the bond market to be slightly off this morning.

Here are some “minute bits” relating to mortgage interest rates that I found interesting:

“The staff also reported on potential risks to financial stability, including those associated with the current low interest rate environment. Some observers have suggested that a lengthy period of low long-term rates could encourage excessive risk-taking that could have adverse consequences for financial stability at some point in the future….

Participants generally saw conditions in the housing market as having improved further over the intermeeting period. Rising house prices were strengthening household balance sheets by raising wealth and by increasing the ability of some homeowners to refinance their mortgages at lower rates. Such a dynamic was seen as potentially leading to a virtuous cycle that could help support household spending and financial market conditions over time….

…most participants saw asset purchases as having a meaningful effect in easing financial conditions and so supporting economic growth. Some expressed the view that these effects had likely been stronger during the Federal Reserve’s initial large-scale asset purchases because that program also helped support market functioning during the financial crisis. Other participants, however, saw little evidence that the efficacy of asset purchases had declined over time, and a couple of these suggested that the effectiveness of purchases might even have increased more recently, as the easing of credit constraints allowed more borrowers to take advantage of lower interest rates….

Participants generally agreed that asset purchases also have potential costs and risks. In particular, participants pointed to possible risks to the stability of the financial system, the functioning of particular financial markets, the smooth withdrawal of monetary accommodation when it eventually becomes appropriate, and the Federal Reserve’s net income….

to the extent that asset purchases push down longer-term interest rates, they potentially expose financial markets to a rapid rise in those rates in the future, which could impose significant losses on some investors and intermediaries….

Overall, most meeting participants thought the risks and costs of additional asset purchases remained manageable, but also that continued close attention to these issues was warranted. A few participants noted that curtailing the purchase program was the most direct way to mitigate the costs and risks….

Want more? You can read the minutes from the March FOMC meeting here.

What we do know is where mortgage interest rates are today… which is what I refer to as “artificially” low thanks to the Fed.  

It’s a limited opportunity for home owners to refinance and to create more cash flow (especially considering the increase in payroll tax) and to reduce the interest paid on their mortgage and for home buyers to secure a long term low mortgage rate on their next home.

If you are considering buying or refinancing a home located in Redmond, Renton, West Seattle or anywhere in Washington state, I’m happy to help you!

Mortgage rates could rise earlier than expected

Yesterday the minutes to the December 13, 2012 FOMC Meeting were released catching many off guard revealing the Fed may pull back on the purchase of mortgage backed securities earlier than originally planned.

Here are some bits from the minutes related to mortgage rates:

“While almost all members thought that the asset purchase program begun in September had been effective and supportive of growth, they also generally saw that the benefits of ongoing purchases were uncertain and that the potential costs could rise as the size of the balance sheet increased…

Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet.”

Noting that “several others” of the FOMC are considering to pull back or stop buying mortgage backed securities prior to the end of 2013 caused a major sell off in the bond markets yesterday following the release of the minutes.

Mortgage rates have been at artificially low rates largely due to the Fed’s participation in buying mortgage backed securities (MBS). Should the Fed cease purchasing MBS and treasury securities, many anticipate that “real” mortgage rates would be closer to what we see in the jumbo or non-conforming markets. Currently jumbo rates are at least full point  in rate higher than conforming mortgage rates based on a 30 year fixed.


If you have been considering buying or refinancing your home and benefiting from today’s low rates, I recommend doing so soon.

If your home is located anywhere in Washington state, where I am licensed to originate mortgages, I am happy to help you! Click here for a mortgage rate quote.

The Fed says….Mortgage Rates to Remain Low

2012-08-20-0845This morning FOMC announced no changes to the current Fed Funds rate (this is no surprise). The Fed has decided to keep the Fed Funds rate at 0 – 0.25% until the unemployment rate is under 6.5%.  This may be some good news to home owners who have HELOCs as many of them have rates tied to the prime rate, which is based on the Fed Funds rate.

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Mortgage rate update the week of October 22, 2012

Although it may appear that this week doesn’t have a lot going on when you review the scheduled economic reports to be released, don’t that trick you. Tomorrow we’ll hear from the Fed and while we do not expect any changes to the Fed Funds interest rate, investors will be paying close attention to the Fed’s announcement.

Mortgage rates are not only impacted by scheduled economic indicators and the Fed’s continued purchase of mortgage backed securities. This morning, as I write this post (8:00 am pst), the DOW is down 235, due to poor corporate earnings and renewed worries about Spain. When stock markets are taking a hit, traders will often seek the safety of bonds, like mortgage backed securities. 

Here are some of the economic indicators scheduled to be released this week:

Wednesday, October 24: FOMC Meeting and New Home Sales

Thursday, October 25: Initial Jobless Claims; Durable Goods Orders and Pending Home Sales

Friday, October 26: Gross Domestic Product (GDP); GDP Chain Deflator and Consumer Sentiment (UoM)

Next week, just before the election, we’ll have the Jobs Report.

Mortgage rates remain at very low levels. If you’ve been considering buying a home or an investment property, you may be surprised how affordable today’s mortgage payment may be. If you’re interested buying a home or refinancing your mortgage on your home located anywhere in Washington state, I’m happy to help you. Click here for a free mortgage rate quote for your Washington home.

Mortgage rate update for the week of September 17, 2012

Last week the Fed announced they’re stepping up their purchase of mortgage backed securities to help keep mortgage rates low. While they are doing this, the FHFA (oversees Fannie Mae and Freddie Mac) is increasing the cost of conforming mortgages by increasing the “g-fees”. I’m seeing banks and lenders increasing rates from 0.25 to 0.50 in fee (the cost for a certain rate) and up to 0.625% more with extension fees (when your loan does not close in time). 

My advice with mortgage rates tends to be that if you like the rate, you should consider locking it. When it comes to locking rates, do a “gut check”. If you’re more uncomfortable with having a certain rate secured (locked) while rates may improve or if you can stomach not being locked and having mortgage rates increase. 

Here is a list of some of the economic indicators scheduled to be released this week:

Monday, Sept. 17: Empire State Index

Wednesday, Sept 19: Building Permits, Housing Starts and Existing Home Sales

Friday, Sept. 21: Initial Jobless Claims and Philadelphia Fed Index

As I write this post (9/17/12 at 8:45am PST) I’m quoting 3.500% for a 30 year fixed based on a loan amount of $400,000 with a sales price of $500,000 (80% loan to value). Seattle area home buyer has credit scores of 740 or higher and the purchase is closing by October 25, 2012. (apr 3.566) with closing cost estimated at $3525 and a principal and interest payment of $1,166.67 (taxes and insurance are not waived).

If you would like me to provide you with a mortgage rate quote on a home located anywhere in Washington, please contact me.