Live Rate Quotes No social security number required
Real Estate Chart of the Day
Mortgage rates and markets change constantly. Stay 100% current by taking The Mortgage Reports by email each day. Click here to get free email alerts, or subscribe to the RSS feed in your browser.
Going on 7 weeks now, mortgage rates have been remarkably consistent nationwide. Regardless of loan type -- conventional, FHA, USDA, VA, or jumbo -- there's been little mortgage rate movement from day-to-day, or week-to-week. Beginning tomorrow, however, that may change.
The Federal Reserve is expected to grease the markets with QE3, a new round of stimulus. When it does, mortgage rates will (finally) move.
Click here to get a mortgage rate quote.
Tuesday, the Federal Open Market Committee meets for a scheduled 1-day meeting, its eighth of 8 scheduled meetings for 2011, and ninth overall.
The FOMC is a branch of the Federal Reserve; a 12-person, revolving committee led by Fed Chairman Ben Bernanke. Members of the FOMC make the final votes on U.S. monetary policy which includes the establishment of a "Fed Funds Rate".
The Fed Funds Rate is the rate at which banks borrow money from each other overnight.
Note that the Fed Funds Rate is a different interest rate-type as compared to "mortgage rates" that come from a bank. The most obvious difference is that the Fed Funds Rate is assigned to loans that last one-third of a day -- 8 hours on the clock. By contrast, mortgage rates are typically tied to loans that last 30 years, or 262,800 hours altogether.
Another big difference is that the Fed Funds Rate is set by committee whereas mortgage rates are set by Wall Street, derived from the price of mortgage-backed bonds.
As two very different interest rates, it follows that there is little correlation between the Fed Funds Rate and mortgage rates. Since 1990, the two benchmark rates have been separated by as much as 5.29 percent, and have been as close as 0.52 percent.
Today, the separation is 4 percent. Tomorrow, rising mortgage rates may drive it north.
There is no doubt that the Federal Reserve will leave the Fed Funds Rate in its current target range of 0.000-0.250% tomorrow; Fed Chairman Bernanke has said that the group will leave the benchmark rate as-is until at least mid-2013.
However, the Fed is expected to add some type of support for markets. How that support is implemented will determine the direction of mortgage rates going forward.
Currently, the U.S. economy is showing signs of strength.
Furthermore, business investment is growing. These are all good signs, especially with inflation remaining in-check. Inflation, after all, is the enemy of mortgage rates. When inflation is present in the economy, mortgage rates tend to rise -- sometimes sharply.
Inflation pressures are now mounting.
Last week's coordinated action between the world's largest central banks amounts to a Fed license to print new dollars as needed, an action that devalues all other dollars currently in circulation. This is an inflationary action, of course.
And now, with the Fed expected to add new stimulus -- either via QE3 or some other means -- it's another call to print dollars.
There are two camps emerging on Wall Street right now. The first thinks additional Fed programs are superfluous and inflationary. If it sees new stimulus, it will sell mortgage bonds in the open market, pushing mortgage rates up. The second thinks more stimulus is needed to keep the economy on track. If it sees stimulus that's big -- but not too big to invite inflation -- it will buy mortgage bonds and cause mortgage rates to fall.
The group with the most post-FOMC conviction will dictate the direction in which rates go.
Mortgage rates can move for a lot of reasons, but "inflation" is the reason that makes them move the most. When inflation pressures mount, it's not unusual to see rates jump one-half percent in a week. We've seen in 5 times in the past 30 months.
It could happen again tomorrow.
Right now, the safe play is to lock a mortgage rate down. There is much risk in waiting to see what happens. Yes, mortgage rates could fall tomorrow, but then again, they may not. Better safe than sorry -- especially when you're dealing with a mortgage loan.
Check today's rates and see whether they fit your budget. By tomorrow, they could be gone.
Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage. Email Dan ator click to get a free, no-obligation rate quote.
You can also find Dan on Twitter and Google+.
Since you have reached the end of this post, you may be interested in checking out the related posts below.
