Fed Will Keep Mortgage Rates Low Through 2009by Tim Manni
The Federal Open Market Committee (FOMC) released the minutes from their June 23-24 meeting yesterday. While the FOMC does release an initial statement immediately following their meeting, the minutes, released several weeks later, provide analysts and market observers with more detailed information to the discussions as well as the decisions made during their last meeting.
Since November the Fed has run a program to buy up to $1.25 trillion in Fannie Mae and Freddie Mac mortgage-backed securities (MBS) in order to keep conforming mortgage rates low. The FOMC’s minutes definitively indicate that the Fed will remain on track to purchase their total by year’s end.
“Indicators of single-family starts and sales suggested that housing activity may be leveling out, but most participants viewed the sector as still vulnerable to further weakness. Some expressed concern that the increases in mortgage rates seen over the intermeeting period had the potential to further depress the demand for housing and thus impede an economic recovery.”
While some sectors of the housing market are showing some signs of life, foreclosures filings continue to increase, putting added strain on home prices. Foreclosures filings rose again in June, up 4.57% from May, and are 33% higher than from the same period a year ago, according to RealtyTrac.
After June flared higher, rates have eased. In fact, last week’s low rates spurred an increase in refi activity. According to the Mortgage Bankers Association, applications for refinancing increased 18% last week. Despite the boost, activity levels are 73% below the peak of activity which occurred in January — just weeks after the Fed announced their MBS-purchase program.
To all those potential refinancers on the sidelines waiting for rates to drop just a little bit lower, we offer this advice again: if a rate is available which works for you, lock it in. “More people get burned trying to time the bottom of the mortgage market than the top of the stock market,” said HSH VP Keith Gumbinger.