Low Arizona Mortgage Rates Until 2014?

It’s a fact, each time interest rates go down mortgage application activity goes up (and we are not just talking about refinances).  As an Arizona Mortgage Lender, I have seen this trend many times.  There is a distinct correlation between low rates and purchase activity.  Over the past few years we have talked about the Fed’s plan to keep rates low in order (in part) to help promote the housing market.  Well, they have succeeded tremendously in accomplishing their goal.

Whether or not you agree with the Fed’s actions one thing has been clear – The Fed has been able to dramatically influence long-term mortgage rates.  Last week the FOMC Press release was published and it contained a significant change in tone.  Before last week the Fed had continuously stated they would keep rates low until mid 2013.  Now, the Fed is targeting low rates through the end of 2014.  Here is the official language direct from the press release:

  “To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

My job as your Arizona Mortgage Lender is to help you understand what the Fed is thinking.  The Fed’s goal is clear – promote economic growth.  The reasoning behind their actions is not so clear however many feel that the Fed has not bought into the somewhat positive housing/economic news that has been published recently.  In the statement the Fed mentioned that they expect growth in the “coming quarters to be modest” and that the “unemployment rate will decline only gradually.”

While the Fed and all its chess moves do not and cannot directly alter mortgage rate levels, they certainly can and have indirectly impacted them.  For now, I believe low long-term fixed mortgage rates are here to stay.  Love it, like it or despise it we will most likely be in the 4% – 5% range on 30 year fixed mortgages for the forseeable distant future.    The FOMC can always revise their language just as they did last week.  I will be sure to keep you posted if and when that should happen.

By Jeremy House

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