First Time Home Buyers
The Federal Reserve adjourns from a scheduled, 2-day meeting today.This is one of the big 8 days scheduled every year.
Upon adjournment, Fed Chairman Ben Bernanke & Co. will release the brief press release that will hit the big question: the Fed Funds Rate (FFR) and we’re expecting no change.
The FFR is an inter-bank lending rate that is also the basis for many consumer rates based on the Prime Rate, notably credit cards.
Mortgage rates, however, should change. Possibly by a lot. The 30-year fixed mortgage does not correlate with the Fed Funds Rate (as shown in the chart at right).
The reason mortgage rates will change today is because, in its statement, the Federal Reserve will highlight vrious parts of the economy, identifying strengths, weaknesses and probable threats to growth.
These observations influence investors with a stake in bond markets and future returns and, with Wall Street on edge right now — unsure of whether recent economic growth is a longer-term trend or a short-lived blip — mortgage rates could shoot higher or they could drop, depending on how traders interpret the Fed.
It’s a difficult time to be shopping mortgages. Rarely are there this money variables that are simultaneously moving. We’ve hit on the Greece & EU issue recently in this blog. It’s spurred a flight-to-quality and that has helped mortgage rates rally.
Mortgage rates may fall today, but there’s very little room for them to fall. This is, however, a lot of room for them to rise.
The Fed meeting adjourns at 1:15 Central today. Be prepared.
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