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Mortgage Rates
Market Trends
After starting the day in the red, mortgage rates rebounded Wednesday afternoon after the Federal Reserve released its April 27-28, 2010 meeting minutes.
It’s good news for home buyers and would-be refinancers in Ellijay, Blue Ridge and Blairsville. Mortgage rates continue to troll along multi-year lows.
“Fed Minutes” are lengthy, detailed recaps of Federal Open Market Committee meetings, not unlike the minutes you’d see after a corporate conference, or condo association gathering. The Federal Reserve publishes Fed Minutes 3 weeks after each respective FOMC get-together.
The Fed meets 8 times annually.
Because of the minutes’ content and density, it’s of tremendous value to Wall Street and investors. Fed Minutes provide a glimpse into the conversations and debates that shape the country’s monetary policy.
The broad scope of the published meeting minutes are in sharp contrast to the more well-known, post-meeting press release which reads more like a policy summary.
And the extra words matter.
Here’s some of what the Fed discussed last month:
- On Greece : A crisis in Greece could slow U.S. domestic growth
- On housing : Despite government support, growth appears to have stalled
- On its mortgage buyback program : There’s little reason to sell mortgage bonds right now
When the markets saw the Fed Minutes, what had been a down day for bond markets turned positive. The less-than-sunny outlook for the near-term U.S. economy sparked bond sales, pushing prices higher.
Mortgage rates move opposite mortgage bond prices.
Wall Street is always in search of clues from inside the Fed about what’s next for the economy and post-FOMC minutes usually give good fodder. April’s meeting was no different.
For now, mortgage rates remain near all-time lows but once the Eurozone issues are settled, rates are likely to rise. If you haven’t locked a mortgage rate, your window may be closing. Once the economy is turning around for certain, mortgage bonds will be among the first of the casualties.
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The Federal Reserve adjourns from a scheduled, 2-day meeting today. It’s one of 8 scheduled Fed meetings for 2010.
Upon adjournment, Fed Chairman Ben Bernanke & Co. will release a formal statement to the market. In it, the Fed is expected to announce “no change” in the Fed Funds Rate.
The Fed Funds Rate is currently in a target range of 0.000-0.250 percent.
The Fed Funds Rate is an inter-bank lending rate. It’s also the basis for Prime Rate, a consumer interest rate on which credit card payments are based, among other consumer loans. Prime Rate is equal to the Fed Funds Rate + 3 percent. Credit card rates, therefore, will likely stay flat today, too.
Mortgage rates, however, should change. Possibly by a lot. The 30-year fixed mortgage does not correlate with the Fed Funds Rate (as shown in the chart at right).
The reason mortgage rates will change today is because, in its statement, the Federal Reserve will highlight various parts of the economy, identifying strengths, weaknesses and probable threats to growth.
These observations influence investors with a stake in bond markets and future returns and, with Wall Street on edge right now — unsure of whether recent economic growth is a longer-term trend or a short-lived blip – mortgage rates could shoot higher or they could drop, depending on how traders interpret the Fed.
It’s a difficult time to be shopping mortgages in North Georgia.
Further complicating matters is Greece’s recent debt downgrade to junk status. A small contagion fear is budding worldwide and, as a result, the flight-to-quality has picked up steam. Mortgage rates are down because of it but could reverse higher at any moment.
Therefore, if you’re actively shopping for a mortgage today, it may be prudent to lock your rate ahead of the Fed’s announcement and any major market reversal. Mortgage rates may fall today, but there’s very little room for them to fall. This is, however, a lot of room for them to rise.
The Fed adjourns at 2:15 PM ET. Call your loan officer to lock your rate.
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Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its current target range of 0.000-0.250 percent.
In its press release, the FOMC noted that, since March, the U.S. economy “has continued to strengthen” and that the jobs markets “is beginning to improve”. This is a step up from the last meeting after which the Fed said jobs were “stabilizing”.
It also reiterated that business spending “has risen significantly”.
Today’s statement marks the 7th straight press release in which the Fed shows optimism for the U.S. economy. Furthermore, the Fed has now closed all but one of the programs it created to support markets during last year’s financial crisis.
Threats remain to growth, however. The Fed fingered a few:
- Employers are reluctant to hire new workers
- High unemployment threatens consumer spending
- Consumer credit (still) remains tight
Also in its statement, the Fed re-acknowledged its plan to hold the Fed Funds Rate near zero percent “for an extended period”. This was expected.
Overall, the statement’s tone was positive and the Fed noted that inflation is within tolerance.
Mortgage market reaction has been muted thus far. Mortgage rates in Ellijay, Blue Ridge, and Blairsville are unchanged post-FOMC.
The FOMC’s next scheduled meeting is a 2-day affair, June 22-23, 2010. The 55-day span between meetings will be the FOMC’s longest of 2010.
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Mortgage markets improved yesterday after the Federal Reserve released its March 16, 2010 meeting minutes. It’s good news for Blue Ridge, Blairsville and Ellijay home buyers and rate shoppers — rates could have just as easily gone the other way.
The Fed Minutes is a detailed recap of the debate and discussion that shapes the nation’s monetary policy. The notes are dense; it takes 3 weeks to compile them for publication.
As compared to the more well-known, post-meeting press release, the Fed Minutes are extremely lengthy. For example:
- March 16 press release : 451 words
- March 16 meeting minutes : 6,152 words
If the press release is the executive summary, the Fed Minutes are the novel.
The extra words matter.The minutes recount what the Fed did, how the Fed did it, and what the Fed plans to do next. And, in the minutes, Wall Street looks for clues.
This is why the report is important to every rate shopper in the country.
When the Federal Reserve publishes the minutes from its meetings, it leave clues about the groups next policy-making steps. For example, in March’s Fed Minutes, it’s clear that the Fed’s concern about inflation is hugely diminished and that’s a major plus for the mortgage bond market.
Inflation causes mortgage rates to rise. The absence of inflation, therefore, helps them to fall. This improves home affordability, among other things.
Similarly, the Fed Minutes note that real estate sales may have been worse throughout the winter months if not for low mortgage rates and the sense among Americans that home prices were troughing. We may infer, therefore, that rising rates may suppress home sales later this year.
Markets are always looking for clues from inside the Fed and the last meeting’s minute signal that the economy is on its way up. If you’re looking for a bargain in the housing market, your window to act may be closing.
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Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged, in its target range of 0.000-0.250 percent.
In its press release, the FOMC noted that the U.S. economy “has continued to strengthen” and that the jobs markets “is stabilizing”. It also said that business spending has “has risen significantly”.
This is a slight departure from the Fed’s January statement in which housing was not mentioned and business spending was said to be “picking up”.
It’s also the sixth straight statement from the FOMC in which the Fed described the economy with optimism. This is a signal to markets that 2008-2009 recession is over and that economic growth is returning.
The economy is not without threats, however, and the Fed identified several:
1. High unemployment threatens consumer spending
2. Housing starts are at a “depressed level”
3. Consumer credit remains tight
The message’s overall tone, however, remained positive and inflation is within tolerance limits
Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to end its $1.25 trillion commitment to the mortgage market by March 31, 2010. Fed insiders estimate that the bond-buying program lowered mortgage rates by 1 percent since its start.
Mortgage market reaction to the Fed press release is, in general, ambivalent. Mortgage rates in Blue Ridge and Blairsville, GA. are unchanged this afternoon.
The FOMC’s next scheduled meeting is a 2-day affair, April 27-28, 2010.
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The Federal Open Market Committee adjourns from a scheduled 1-day meeting today, its second of the year.
The FOMC has held the Fed Funds Rate in a target range of 0.000-0.250 percent since December 16, 2008, and the voting members of the Fed are expected to vote “no change” again today.
However, no change in the Fed Funds Rate doesn’t necessarily mean no change in mortgage rates. This is because the Fed Funds Rate is a different interest rate from the rates Blairsville home buyers get from a loan officer.
* Fed Funds Rate : Short-term rate at which banks borrow from each other
* Mortgage Rate : Long-term rate of interest a homeowner pays on a mortgage
Mortgage rates are more responsive to what the Fed says as compared to what the Fed does.
After each FOMC meeting, Fed Chairman Ben Bernanke & Co issue a formal press release to the markets. At roughly 400 words, the statement is a brief commentary on the strengths, weaknesses, and threats for the U.S. economy.
Wall Street watches the statement with great interest and this is why mortgage rates are often volatile on the days of an FOMC adjournment. One mention of a word like “inflation” and traders rush to dump their mortgage bond positions.
Inflation is the enemy of mortgage rates.
After the Fed’s last meeting in January, it told us that the economy had “weakened further”, led by steep declines both in housing and employment. Global demand was off, too. The negative tone of the Fed’s statement caused mortgage rates to fall to near an all-time low.
This month, expect a less gloomy message.
Since January, there’s been a modest rebound in housing, employment appears more stable, and Retail Sales just posted huge gains. If the Fed alludes to improvement in any or all three, mortgage rates will likely reverse and zoom higher.
We can’t know what the Fed today will say so if you’re floating a mortgage rate and wondering whether to lock, the safe approach would be to do it today, prior to 2:15 PM ET.
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Mortgage markets reeled Wednesday after the Federal Reserve released the minutes from its January 26-27, 2010 meeting. Mortgage rates in Georgia are now at their highest levels since the start of the year.
The Fed Minutes is a follow-up document, delivered 3 weeks after an official FOMC meeting. It’s a companion piece to the post-meeting press release, detailing the debates and discussions that shaped our central bankers’ policy decisions.
The Minutes is a terrific look into the Fed’s collective mind and, yesterday, Wall Street didn’t like what it saw. Specifically, the report disclosed that:
- The Fed plans to break support for mortgage markets after March 31, 2010
- Raising the Fed Funds Rate will be a key part of the Fed’s strategy to tighten monetary policy
- The fundamentals behind consumer spending strengthened modestly
Furthermore, the Fed Minutes said that there is a growing risk of “higher medium-term inflation”. Inflation, of course, is awful for mortgage rates.
Overall, the Fed’s economic optimism appeared stronger after its January meeting as compared to its December one. A stronger economy should lead to better job growth and higher home prices throughout 2010.
Mortgage rates were up yesterday but they remain historically low. And many analysts think that after March 31, 2010, rates will rise even more. Therefore, if you’re buying a home in the near-term, or know you’ll need a new mortgage, consider moving up your time frame.
Every 1/8 percent makes a difference in your household budget.
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The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.
In its press release, the FOMC noted that the U.S. economy “has continued to strengthen”, that the jobs markets is getting better, and that financial markets are supportive of growth.
There was no mention of the housing market’s strength. The last 3 statements from the Fed included that specific verbiage.
It’s the fifth straight statement in which the Fed spoke about the economy with optimism. This should signal to markets that 2008-2009 recession is over and that economic growth is returning to U.S. economy.
The economy isn’t without threats, however, and the Fed identified several in its press release, including:
- Credit remains tight for consumers
- Businesses are reluctant to hire new workers
- Housing wealth is down
The message’s overall tone, however, remained positive and inflation appears is still within tolerance.
Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to wind down its $1.25 trillion commitment to the mortgage market by March 31, 2010. This is noteworthy because Fed insiders estimate that the bond-buying program suppressed mortgage rates by 1 percent through 2009.
Mortgage market reaction to the Fed press release is, in general, negative. Mortgage rates in Blairsville are rising this afternoon.
The FOMC’s next scheduled meeting is March 16, 2010.
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The Federal Open Market Committee ends a scheduled, 2-day meeting today in Washington. It’s the first of 8 scheduled meetings for the policy-setting group in 2010.
The group adjourns at 2:15 PM ET.
As is customary, upon adjournment, the Fed will issue a press release to the markets recapping its views of the country’s current economic condition, and the outlook for the near-term future.
The post-meeting statements from the Fed are brief but comprehensive. And Wall Street eats them up. Every word, sentence and phrase is carefully dissected in the hope of gaining an investment edge over other active traders.
It’s for this reason that mortgage rates tend to be jittery on days the FOMC adjourns. Wall Street is frantically re-balancing its bets.
Today should be no different.
The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent — the lowest it’s been in history. However, it’s what the Fed says Wednesday that will matter more than what it does.
After the Fed’s last meeting in December, it made several observations:
- The jobs market is getting “less worse”
- The housing sector is making improvements
- Financial markets are stabilizing further
The economy is gradually improving, the Fed told us, but there are still risks to the economy ahead. Furthermore, inflation remains in check.
As compared to December’s press release, today’s FOMC statement will be closely watched. If the Fed changes its verbiage in any way that alludes to strong growth and/or inflation in 2010, expect mortgage rates in Ellijay to rise as Wall Street moves its money from bonds to stocks.
Conversely, reference to slower growth in 2010 should lead rates lower.
We can’t know what the Fed will say so if you’re floating a mortgage rate right now or wondering whether the time is right to lock, the safe approach would be to lock prior to 2:15 PM ET Wednesday. After that, what happens to rates is anyone’s guess.
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Both mortgage rates and home affordability took a turn for the better in Ellijay Wednesday after the Federal Reserve released its December 15-16, 2009 meeting minutes.
The Fed Minutes is a follow-up piece to the post-FOMC meeting press release. But whereas the press release is succinct and to-the-point, the minutes are lengthy and often meandering.
As a comparison, December’s press release contained 535 words. December’s minutes had 6,260.
But these “extra words” aren’t superfluous. They’re actually very important to homeowners. Because the Federal Reserve’s internal debates help to shape Wall Street expectations, it doesn’t take much for those conversations to have a trickle-down effect on Main Street.
For example, after the December meeting, the Fed said that economic growth is steady, inflation is in check, and an orderly wind-down of mortgage market support was underway. A look at the minutes, though, showed some disconnect.
Some Fed members believe rising commodity prices could lead to stronger-than-expected, and others think that improvement is housing could be “undercut” by a pull-back in government stimulus.
Overall, the Fed appears optimistic about the economy, but not as optimistic as on December 16. Mortgage markets responded favorably to the minutes and mortgage pricing improved.
Although rates remain higher as compared to early-December, pricing has been on a good run this week. If you’re under contract for a home in Georgia or just looking to refinance, now may be a good time to lock.
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- Fed Debates Extending Its Mortgage Purchases Beyond March (dailyfinance.com)
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