Fed Still Buying Bonds to Help Lower Mortgage Rates

Home buyers have been pleased to see interest rates drop over the last month, with the Federal Reserve still holding strong on its stance to purchase $85 billion in mortgage backed securities.  The goal is continue its downward pressure on long-term mortgage rates to help bolster the housing market and the economy.

After months of speculation in the summer months that the Federal Reserve would halt or ease its purchase program.  This is welcome news to a buyer base that has seen long-term mortgage rate averages rise near the 5 percent mark and stay there for much of the year.   This move is expected to drop these rate averages down to around the 4 percent level into 2014.

“People who were priced out of the market by the jump in rates are getting a do-over,” Joel Naroff, president of Naroff Economic Advisors, told Bloomberg. “Rates aren’t going back down into the low 3s, but we may see the high 3s and we’ll see those rates remain stable through at least February or March. That’s going to restore buyer confidence.”

Diane Swonk, chief economist at Mesirow Financial, told the news source that it’s become apparent the Fed has made the housing market a point of emphasis over the past month, which is why they have devoted themselves so fully to bond buying over this time.

While the Fed continues its commentary to continue the purchase of mortgage backed securities, continued signs of economic recovery will change the sentiment quickly.  As an example, on Nov. 8th, 2013, economists were projecting only 120,000 jobs to be created.  The actual number came in at 204,000, which immediately sent mortgage rates .25% higher.  The more good news that comes to the economy, the more likely we are to see rates go higher.

Interested home buyers have their share of options when it comes to finding affordable financing for their new home purchase.  If conventional loan offerings are too strict for qualifying purposes, then there are FHA loans, USDA loans and VA loans also available with flexible requirements.

If you’d like to learn more about your Dallas mortgage options and want to plan your financial future, contact our team of mortgage planners today or request a home purchase review to better understand your options.