The Fed Keeps Rates the Same
The Fed met on Wednesday to discuss the state of the US economy. Results are in: things are looking up! Cautiously, however…
The Fed kept rates the same, in the 0-0.25% range. However, a huge comment made by Chairman Ben Bernanke was that the Fed will slow, and then completely stop by the end of October, its purchases of US Treasuries and Mortgage-Backed Securities.
Big deal? YES. The Fed’s purchases of Treasuries and MBSs has been a huge driver of low interest rates in the past year or so. With this winding down, there is nowhere to go but up in interest rate land.
If you have clients waiting for lower interest rates, it is time to show them the difference a 5.5% and 6.5% interest makes on their monthly payment. For a $300,000 mortgage, this is an increase of $200/month in their payment.
In other words, a jump of 1% translates to about $35,000 in purchasing power lost, as every $10,000 in loan amount is roughly $60/month in payment.
Get those buyers moving. Not only is the tax credit going away for First Time Home Buyers, their interest rates are heading north as well!
For more info, read this article.
