What is Happening in the Mortgage Market

The end of Fed supported Mortgage Backed Security Purchase Program draws near.

The Fed does begin their two day Federal Open Market Committee meeting today, ending with the release of their formal Policy Statement and Interest Rate Decision at 2:15pm ET tomorrow. I feel that there will be no change in interest rates - the Federal Funds Rate currently stands at 0.25%. However, the Policy Statement from the Fed is extremely important as always…will they hint at any inflation concerns? Will they reiterate Bernanke's words from last week saying that the current recession is most likely over? Will they comment as to the future of their stimulus programs, such as their Mortgage Backed Security purchase plan? The wording they use is always carefully crafted as the market looks for clues - and while the Fed doesn't like to deliver surprises, the wording of this statement will be very interesting to hear.

The Fed must be very careful how it deals with the Mortgage Backed Security purchase program. Fed members know that they can't pull the rug out from under their purchases, which would cause home loan rates to rise quickly under the reduced demand for Bonds…but on the other hand, the program can't continue forever, and is currently set to expire near the end of this year. The Fed has purchased approximately $870B - or about 70% of the $1.25T committed to, and if they stay on course with their plan, home loan rates will indeed rise as the purchasing slows and stops. There truly is an opportunity at hand to purchase or refinance a home with historically low financing rates right now, and it won't last forever. In the future, many will look back and wish they had acted now.

Apply online, call or come to the office for a free pre-approval today.

Richard Woodward

Banker / Senior Branch Manager

17311 Dallas Parkway Suite 173 Dallas, TX 75248

Visit Us Online - www.Envoy-Mtg.com