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August 13, 2012

Low Mortgage Rates Through 2014?

(Continued)

Syndicated —

But while the Fed doesn't set mortgage rates, the panel's actions and comments do influence the mortgage market. When the Federal Reserve speaks about the economy, the market listens very carefully and prices of mortgage-backed securities change accordingly.

Expect low rates through 2014

Based on the comments from the last FOMC meeting, the economy is slowing. The Fed expects to leave the Federal Funds Rate at an exceptionally low level through at least late 2014 and has a couple of tools it can use (such as Operation Twist) to keep interest rates low while keeping inflation at bay.

All of which will loosely translate into mortgage rates remaining low for the foreseeable future.

Last week, the 30-year fixed mortgage rate average dropped to a new record low of 3.34 percent, and even if mortgage rates went up a full 2 percent while the Fed kept the Federal Funds Rate at zero, that would mean mortgage rates would be at 5.5 percent - still a very, very affordable rate by historical standards.

Related:

Justin McHood is America's Mortgage Commentator and lives in the Phoenix, Arizona area. You can find Justin on Facebook, Twitter, and LinkedIn. He is happy to answer any mortgage-related questions that you may have.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

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