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Mortgage Rates

Posted on the 02 August 2012 by Homesmsp @HomesMSP

Mortgage interest rates have been lower than we have seen in many years!  The Federal Open Market Committee (Fed) met this week and investors were waiting to see what their comments were after the meeting.  Some investors were hoping for a new stimulus plan to see if the economy would start moving faster.  The Fed didn't do that, they left interest rates alone and said that they expect the Federal Funds Rate to stay low into 2014. 

The Fed did state that they were going to continue the Operation Twist program that they have been doing.  That program basically allows the Federal Reserve to sell it's securities with a duration of 3 years or less and uses the proceeds to purchase longer-term securities with durations of 6 to 30 years.

The Fed also stated that the US economy has been slowing.  It expects growth to remain moderate through the end of the year and then slowly start to pick up. 

The Federal Funds Rate is not the same as mortgage interest rates.  The Federal Funds Rate is the rate that banks borrow money at.  Mortgage interest rates are set by Wall Street and depend on what is going on around the world.  Wall Street expected the Fed to release a new stimulus program and when the Fed didn't do that, the bond market reacted.  Interest rates moved a little worse, but there wasn't a major change.

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