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The feds have just announced that they will be keeping the Federal Reserve rates low until 2014. In the past they announced that rates would remain low until the middle of 2013, which helped the market confidence and ensures recovery. The recovery has been present however it has not been as “booming” as economic analysts were hoping.
As with everything that relates to the economy, there is always some sort of backlash. Unfortunately, it’s not always good backlash either but this was one of the rare instances where the markets reacted in a positive way. Once the announcement was made, the Dow rose near 200-points by 11AM after markets opened. There are economists warning of this only being a “temporary” solution to our problems though. Much like a band-aid, we may be covering up the wound for now and allowing it to slightly heal but more attention will be required to fully-heal in the near future.
There is also the looming possibility that the Fed could potentially raise interest rates sooner if the economy heads within the right direction. The following are words from a senior economist regarding the Fed’s announcement,
“It’s not a vow or a commitment. If the outlook changes on the unemployment or inflation, the Fed reserves the right to change its mind.”
So it would be ill advised to count on these low rates to remain intact until the point the Federal Reserve stated. As the current economic situation stands, we are slowly improving and it seems we will continue to improve in just about every key-aspect so the chances of the Fed’s switching their stance on lower rates has potential.
This announcement from the Fed’s came after their annual voting-member shuffle. With the changes made to the members in-tact, we are introduced to four new members; John Williams of San Francisco, Dennis Lockheart of Atlanta, Sandra Pianalto of Cleveland and Jeffrey Lacker of Richmond. Besides this shuffle amongst the members, the first Fed meeting of this year is a noteworthy situation as this will be the very first time they release economic forecasts. These forecasts are meant to predict where the federal funds rate will be over the next coming years.
Low Fed rates are excellent for mortgage rates for in 2012. Although the Fed rates are not directly connected with mortgage rates, if banks can borrow money from the feds for less, then they can offer mortgages for less as well. The confirmation that fed rates will be low until mid-2014, mortgage rates should maintain lower levels for the foreseeable future.
If you are interested in refinancing or buying a home, this might have helped to buy you some time. Do not make the mistake of thinking rates are going to be low forever. Our advice would be to lock in your mortgage rate as soon as you are able. You have more to lose by not locking in your mortgage rate immediately than you do by waiting for even low rates. For more information on current mortgage rates call Riverbank Finance at 1-800-555-2098 or submit a request for information below.