4.5 Percent Mortgage Rates Are Coming


Recent Fed announcements are showing signs of lowered mortgage rates. With mortgage rates near 50 year lows Fed again surprised many investors as it plans to buy up to $300 billion of long-term government bonds and $750 billion in additional mortgage backed securities. But what does it all average for you?

This is likely to produce a big drop in mortgage rates in upcoming days. Refinancing should be able to save you at the minimum $200 on your monthly payment.

The 30-year fixed-rate mortgage averaged 4.98% for the week ending March 19, down from 5.03% last week. The mortgage averaged 5.87% a year ago. It hasn’t been lower since the week ending Jan. 15, when it hit record low of 4.96%. However, the rate could soon drop to 4.5 percent, which would drop the payment by $244.

Because spending that kind of money requires the Fed essentially to print money, it meant risking inflation. But it does not meant that there will be inflation at all. As long as unemployment and consumer spending will keep inflation in check as businesses keep up down prices in order to continue sales, there will be no inflation.

Feds move to buy out Treasury securities, moves prices higher and drives down the provide or interest rate. 10 year Treasury bond dropped by the biggest one day amount since 1981.

Federal save is trying to ease up clocked up markets as edges are unable to sell their loan portfolios to investors. Money that is made from selling loan portfolios allows edges to lend further.

Fed moves should further raise refinancing activity and already many homeowners are nevertheless wondering if they should wait for already lower rates proves to be more difficult.

Housing market has not improved and borrowers who wait too long to refinance could find that the no longer have enough equity in the home to qualify. But the housing market may be starting to stabilize after interest rates dropped below 5 percent.

There are nevertheless many signs of economy looming out of hand and Fed funds rate currently at its lowest is helping edges to lend again. But nevertheless tight credit market remains.

Good news, now with a surprising twist comes for ARM borrowers as adjustable-rate mortgages that are about to reset soon may bring a rates as low as 3.5%. That is because ARMs are typically tied to 12-month average of one-year Treasury bill which so far it is below 1 percent.

This may help if you have currently 30 year fixed mortgage and you plan to stay in your home for another 5 to 6 years as refinancing may be a good for a long term. If the economy recovers and inflation becomes an issue, the rates will increase much higher, in which time you can refinance to fixed rate again.

The Fed is now ratcheting up other efforts, like buying securities and essentially printing money, to try to loosen credit markets. With expansion of money supply, it’s only going to generate economic activity if people truly borrow.

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