Mortgage Rates Drop in Arizona – ARCHIVE

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Big news!  Arizona mortgage rates drop!  For months, the mortgage market has awaited September 18, 2013 to see what the Fed would do regarding their mortgage rate policy.  After waiting and guessing, expecting and anticipating the Fed shocked the market.  They surprisingly decided to continue purchasing mortgage backed securities rather than “tapering” their purchase program as many expected.  As a result, we saw mortgage rates drop.

Big Ben and the Fed felt that our economy was not quite ready to remove the downward pressure they have placed on Arizona mortgage rates for years now.  As a result we saw mortgage rates drop.  The Fed’s program (known as “Quantitative Easing“) has pushed mortgage rates as low as 3.25% in the past on a 30 year fixed.  The plan is and has been to stop applying downward pressure at some point.   Initially, the Fed had ear marked Sept 18th as the day they would start to stop their program.  While the Fed will undoubtedly stop pushing mortgage rates down at some point, for now the Fed will continue purchasing mortgage-backed securities which in turn may cause us to see mortgage rates drop.

Why Did the Fed Refrain from Tapering?

With the housing market at the center of both the economic tailspin we went through and the economic recovery we are in the middle of, the last thing The Fed wants and needs to do is to stall progress.  As mortgage rates increase homes become more expensive for potential home buyers.  A monthly mortgage payment at a rate 3.5% is more affordable compared to the same home price based on a 5.5% home loan.    As a result, rising rates tend to make home buyers second guess their Arizona home purchase.

The Fed recognized that the economy was not ready to adapt to a “Fed-less” mortgage rate market.   After Ben Bernanke’s announcements regarding a Fed taper in May and June of this year mortgage rates shot up 1% to 1.5%.  It didn’t take too long for the housing market to react and show potential signs of slowing.   As a result, at this point The Fed has chosen to stay the course for now and continue to purchase mortgage-backed securities which should help keep Arizona mortgage rates low.  In fact, we saw mortgage rates drop as soon as the Fed announced they would stay in the rate game for now.

When will the Fed taper?

There is no specific date set for a Fed taper at this point.  The Fed has been quite clear about their plan to move forward with regard to tapering.  The move to taper will depend on economic data.  Most notably, the Fed will be staring down unemployment and inflation numbers in order to track economic stability and strength.  Once they feel the economy can handle slightly higher mortgage rates without sending shock waves through our housing market we will see a taper.  I will keep you up to date!  For now, time to celebrate the fact that we just saw Arizona mortgage rates drop!

By Jeremy House

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