Fed's $300 Billion Move | Does That Mean Lower Rates?

Here we go again, with the talking heads on financial news misinterpreting the impact of the Fed's actions on home loan rates.


Here's the scoop

What the Fed just announced is huge – they have committed to buy another $750B in Mortgage Backed Securities, and $300B in Treasuries.

But what does this mean and why do you care?

Their actions provide a demand for Mortgage Backed Securities, which should help keep a ceiling on home loan rates moving much higher in the foreseeable future. That's good news, for homebuyers who are seeing the bargains out there and understanding that now is the time to act. Good news for those who are ready to refinance too.

But an important distinction – this does not mean rates may move significantly lower. Depending on exactly which coupons the Fed purchases when they go shopping for Mortgage Backed Securities, their actions may keep a lid on rates, but not push them very much lower. And based on what they've been buying since the beginning of this year when they started their purchasing program – that is exactly how it has played out.

Present home loan rates are within inches of historic lows. This is great news for anyone looking to buy a home right now with list prices down and rates still low!  NOW is the time to act and purchase that new home.

by Michael Lopez, President of Alpha Mortgage Corporation in Wilmington North Carolina

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