Mortgage Rates to Stay at Low Levels for Rest of 2013
The Fed announced last week that they have no plans to ease their QE program in 2013, which will keep mortgage rates at nice low levels.
Michigan Home Buyers, it’s about time we heard some potentially good news for mortgage rates! The Fed’s Federal Open Market Committee (FOMC) announced that for the time being, the quantitative easing (QE) program would remain unchanged. Considering last time they hinted about changing this program mortgage rates skyrocketed, this is fantastic news!
Moral of the story is the Fed will continue to buy mortgages for the foreseeable future which should keep mortgage rates from increasing any time soon. Experts are expecting the Fed to not start tapering this QE program until the end of the year.
What is the Fed’s QE Program and How Does it Affect Mortgage Rates
The Federal Reserve currently is scooping up about $40 billion in mortgage-backed securities monthly. By purchasing so many of these securities, it ends up keeping long-term mortgage rates at low levels. This QE Program is what initially pushed mortgage rates to all time low levels in 2012, helping spur the housing recovery to what it is today.
When the Fed begins tapering and eventually stops making these purchases, general demand is are expected to fall; thus prices will likely fall as well. When prices for bonds and securities drop, mortgage rates traditionally rise to make up the difference. Thus as soon as the Fed stops forcibly altering the market, mortgage rates will push away from the very low numbers we have gotten used to.
Rising mortgage rates is definitely a concert for the housing market and its recent recovery. Higher mortgage rates make homes less affordable as more of your monthly payment will go to interest, making the purchase price you can afford much lower. Considering there is still a lack of first time homebuyers in Michigan, higher down payment and monthly payment requirements will make it even harder to find a home to buy in this competitive market.
Why the Fed is Not Tapering Off Their QE Program
The Fed stated that the economy’s modest recovery and continued high unemployment levels as the reasons why they planed to continue buying mortgage backed securities to keep rates at low levels. Home sales and house prices are soaring closer to numbers we haven’t seen in Michigan since before the housing crash. But due to the lack of inventory of homes for sale, they fear a change to their QE program could derail the housing market’s improvements.
Look for the Fed to continue buying mortgage backed securities until the economy continues to get stronger and until national unemployment rate fall to about 6.50%. Expectations are for the program to start tapering off at the end of the year and end by Summer 2014.
Again this is great news for home buyers here is Oakland, Wayne and Macomb Counties. With a limited supply of homes on the market, finding a home to buy could take a while. This news should give buyers confidence that their purchasing power should remain constant for the next few months.
Give us a call and we’ll be happy to provide you with a personal review of your mortgage situation.