The Fed’s Statement And What It Means For Mortgage Rates (April 27, 2011)

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The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent in April.

The vote was 10-0 -- the third straight meeting after which the FOMC vote was unanimous.

A Moderate Economic Recovery

In its press release, the FOMC noted that since its March 2011 meeting, the economic recovery is proceeding "at a moderate pace" and that labor markets conditions are "improving gradually".

Household spending and business investment "continue[s] to expand" but the housing sector remains "depressed".

Furthermore, the FOMC's statement discussed the Federal Reserve's dual mandate of (1) Managing inflation levels, and (2) Fostering maximum employment.The statement acknowledged recent inflation pressures on the economy, but it expects those pressures -- because they're related to oil and food prices -- to be "transitory". Unemployment remains "elevated".

Is QE3 A Foregone Conclusion?

The FOMC statement re-affirmed the group's plan to keep the Fed Funds Rate near zero percent "for an extended period" of time, and to keep its $600 billion bond market support package -- more commonly called "QE2" -- intact.

If you'll remember, QE2's introduction last November triggered the end of the 2010 Refi Boom. It created a near-term dollar-devaluation concern that sparked an MBS market exodus. And now, today's FOMC statement suggests that a third support package may follow on QE2's heels.

QE2 is due for expiration June 30, 2011. QE3 could start immediately thereafter. It's unclear how rates would move on an announcement like that, but if history is an indicator, QE3 would lead mortgage rates higher.

The bigger the package, the bigger the force.

The Fed Signals : "Lock Your Mortgage Rate"

So far today, mortgage markets are reacting to the FOMC favorably. It's not in fundamentals, though; it's a broad covering of bad bets from abroad. Longer-term, mortgage rates are rising.

The Fed is signaling it.

If you've been watching mortgage rates these past few weeks, you've seen them trickling lower. That window is closing quickly. The right time to lock that mortgage rate is right now. Mortgage rates have little room to fall but lots of room to rise.

To get a live mortgage rate quote, click here. It's a quick form that lets me send you accurate, real-time mortgage rates. There's no obligation, of course, but you'll find my rates to be very low. And I love to work with my readers.

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(This post adapted from Bring the Blog, a blog-writing service for lenders and REALTORS®)