Mar 22

Fed Vows to Keep Benchmark Rate Low

Fed Vows to Keep Benchmark Rate Low

The Federal Reserve voted on Wednesday to keep its benchmark interest rate near zero and at historic lows as the economy continues to recover from the COVID-19 pandemic. The Fed went on further to indicate that they won’t likely raise interest rates until 2023—at the earliest.

But that doesn’t necessarily translate into good news for mortgage rates—which have begun rising over recent weeks. The Fed’s benchmark rate does not directly influence mortgage rates. The Fed’s federal funds rate is not what consumers pay. It is what banks charge one another for short-term lending. However, the Fed’s action can have an indirect impact on what consumers end up paying on mortgage rates.

Mortgage rates loosely follow the U.S. Treasury bond, but over recent months, even that relationship has varied, Tendayi Kapfidze, chief economist at LendingTree, told MarketWatch. Ten-year Treasury rates rose in August 2020 as mortgage rates fell.

Mortgage rates reached an all-time low in January (the 30-year fixed-rate mortgage averaged 2.65%), according to Freddie Mac. But over recent weeks, they’ve been rising, increasing more than 30 basis points since the start of the year. Last week, the 30-year fixed-rate mortgage averaged 3.05%. Investors are growing concerned about inflation.

Still, economists are quick to note mortgage rates are still hovering near all-time lows. “People have been spoiled by getting sub-3% loans,” Robert Frick, corporate economist at Navy Federal Credit Union, told CNBC.

One move that could help push mortgage rates lower: The Federal Reserve has been increasing its purchases of mortgage-backed securities to add liquidity into the market since the pandemic. “Reaffirming its commitment to ongoing asset purchases while acknowledging that a tapering is on the horizon at some point—likely pretty far off—should help slow the rise of mortgage rates,” Danielle Hale, chief economist of realtor.com®, told MarketWatch.

The Mortgage Bankers Association predicts mortgage applications to stay high even as rates tick above the 3% mark. “While mortgage rates are likely to move somewhat higher, the purchase market remains on track for a record year,” Mike Fratantoni, MBA’s chief economist, told MarketWatch.

Source:
“Here’s How the Fed Decision Impacts Your Wallet,” CNBC (March 17, 2021) and “The Fed Plans to Keep Interest Rates Low—Here’s Why Mortgage Rates Could Rise Anyway,” MarketWatch (March 17, 2021)
©National Association of REALTORS®
Reprinted with permission
Share this:

admin

For all of your Real Estate needs, place yourself in the competent hands of a career Realtor who is a Philadelphia native and Delaware County resident. Skilled, smart and enthusiastic about his work and his life, Anthony DiDonato has the appealing combination of business sense and people skills gives him an edge in an industry that demands both.

Educated at Drexel University with a dual major in accounting and finance and minors in management and psychology Anthony DiDonato offers over 25 years of experience in the real estate industry. He has been a real estate investor since 1985 and a member of H.A.P.C.O. (Landlord Association). He became a licensed Realtor in 1992 and a member of the Local, Pennsylvania and National Associations of Realtors. Anthony DiDonato is also a member of the Computerized Multiple Listings, (MLS) and Internet Marketing Programs. In 1997 Anthony DiDonato became Century 21 All-Elite, Inc. Corporate Secretary.

Anthony DiDonato believes in taking his profession to the highest level of quality service. He is known for finding that “perfect” property in Philadelphia, Delaware County, Chester County, Montgomery County and surrounding areas in Pennsylvania for his buyers and helping his sellers prepare their properties so they sell quickly and efficiently.

When it comes time to negotiate the terms of a contract, Anthony DiDonato has the knowledge, experience, and professionalism applied to meeting – or exceeding – his clients’ expectations. His service to his clients is second to none. His honesty and integrity have been his claim to fame.

For Superior Real Estate Representation in the Delaware Valley, Philadelphia, Delaware County, Chester County, Montgomery County and surrounding areas in Pennsylvania… call Anthony DiDonato.