The Fed (Federal Open Market Committee) met this week and released their statement yesterday. The mortgage bond market immediately reacted with interest rates getting slightly worse (again)! The Fed didn't change rates and really didn't change their statement drastically, but there were enough little changes to affect the market. The mortgage market didn't like what they heard.
From the Fed statement:
"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 agency 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. 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."
The Fed also addresses the housing sector, saying it had strengthened and household spending has increased. They are still concerned about employment as the level of unemployment is still high.
We'll have to see what the next few days brings to the mortgage bond market. There is renewed concern in Europe regarding their economy. In a press conference after the meeting, the Fed Chairman said he didn't think the events in Cyprus would slow the US economy.
What this means for all of us is that interest rates will continue to increase, hopefully slowly! We already have seen that. Home prices are also starting to increase and with the low inventory, there are many multiple offers. So if you are looking for a new home, it is definitely a good time to be out there, but you may need a little patience!!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants - Email - Website
