Fed Move Doesn’t Suppress Mortgage Rates

The Federal Reserve may have voted to leave its short-term interest rates unchanged this week, but that didn’t stop lenders from moving up mortgage rates. Average mortgage rates are continuing an upward trend in 2018.

“The Federal Reserve did not hike rates this week, but the market views future hikes as a near certainty,” says Len Kiefer, deputy chief economist at Freddie Mac. “The expectation of future Fed rate hikes and increased borrowing by the U.S. Treasury is putting upward pressure on interest rates.”

Freddie Mac reports the following national averages for the week ending Feb. 1:

  • 30-year fixed-rate mortgages: averaged 4.22 percent, with an average 0.5 point, rising from last week’s 4.15 percent average. Last year at this time, 30-year rates averaged 4.19 percent.
  • 15-year fixed-rate mortgages: averaged 3.68 percent, with an average 0.5 point, increasing from last week’s 3.62 percent average. A year ago, 15-year rates averaged 3.41 percent.

Source: Freddie Mac

Fed’s running out of Options to Help Housing?

The Federal Reserve is running out of options to help the housing market, and it’s time lawmakers step-up and do more, according to a paper by top economists, which was presented Friday at the U.S. Monetary Policy Forum. (Haven’t we heard this before?)

Federal Reserve officials, members of foreign central banks, and economists discussed how the housing market continues to hamper overall economic recovery. The Fed has already lowered its key interest rate to near zero and mortgage rates are already at all-time lows, which are helping refinancers and home purchasers lock in big savings.

However, the overhang in the housing market “may not be easily addressed by monetary policy,” Michael Feroli, chief monetary policyat JPMorgan Chase, said at the meeting.

Some economists said there’s still more the Fed can do: Lower interest rates even more. However, some note that with more stringent lending standards those who can qualify for refinancing likely already have, so lowering the rate may not have impact. 

Source: “Why the Federal Reserve Can’t Fix Housing,” CNNMoney (Feb. 24, 2012)

“Mass Refinancing Plan” being considered

The White House is considering a housing proposal that would allow millions of home owners with government-backed mortgages to refinance into lower interest rates, The New York Times reports. 

“A wave of refinancing could be a strong stimulus to the economy, because it would lower consumers’ mortgage bills right away and allow them to spend elsewhere,” an article in The New York Times notes.

Many home owners have been unable to take advantage of today’s low interest rates — which are averaging around 4 percent — because they don’t qualify for refinancing at the best rates since they owe more on their home than it is currently worth or because of poor credit. The refinancing plan is still under discussion of how it would work, The New York Times said. 

“This is the best stimulus out there because it doesn’t increase the deficit, it accomplishes monetary policy, and it reduces defaults in housing,” Christopher J. Mayer, an economist at the Columbia Business School, told The New York Times. 

 Source: “U.S. May Back Refinance Plan for Mortgages,” The New York Times (Aug. 24, 2011) 

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