The Fed and Interest Rates (Mortgage Questions)

[kurty[B]]

I know a mortgage lender and she has helped me so much in understanding mortgage lingo, and knowing the proper questions to ask, and being honest with me when another lender had a much better loan to offer me.

Today, I'm meeting with that lender to talk about locking-in a rate (I am having a house built, and it probably will not be done until spring time at the soonest).

Looking at the Federal Reserve's site, they posted the following Press Release.

http://www.federalreserve.gov/boardd...20/default.htm

Release Date: September 20, 2006



For immediate release

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.

The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market.

Readings on core inflation have been elevated, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.

Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen. Voting against was Jeffrey M. Lacker, who preferred an increase of 25 basis points in the federal funds rate target at this meeting.

I know guessing what the Fed is going to do with interest rates is not the easiest game, but with the housing market cooling down would they be thinking about decreasing or increasing interest rates down the road? I know there is much more involved in this than just property ownership, but I am curious.

I am going to see what option there are about setting up a float down, and make sure to get as much information as possible with the lender today. Luckily, today I am not finalizing everything, just discussing further options.

[NoSoup]

Originally Posted by kurty[B]

I know a mortgage lender and she has helped me so much in understanding mortgage lingo, and knowing the proper questions to ask, and being honest with me when another lender had a much better loan to offer me.

Today, I'm meeting with that lender to talk about locking-in a rate (I am having a house built, and it probably will not be done until spring time at the soonest).

Looking at the Federal Reserve's site, they posted the following Press Release.

http://www.federalreserve.gov/boardd...20/default.htm



I know guessing what the Fed is going to do with interest rates is not the easiest game, but with the housing market cooling down would they be thinking about decreasing or increasing interest rates down the road? I know there is much more involved in this than just property ownership, but I am curious.

I am going to see what option there are about setting up a float down, and make sure to get as much information as possible with the lender today. Luckily, today I am not finalizing everything, just discussing further options.

The housing market cooling down doesn't have any direct impact on what they do with interest rates - there are literally hundreds of factors. Unfortunately, there isn't really just a few that are relatively accurately predicable that will give you a good idea as to what the market will do in six months or so.

If you can, lock in your rate for the long haul. If rates drop significantly, often times brokerages will allow you to get the lower rate (they do this to help encourage you to stay with them, as often times if you are locked in at well above market rate when the time comes you'll probably want to shop around some)

As of today, you can still lock in a 30 year fixed mortgage for less than six percent - it isn't going to get a ton better than that, but could potentially get worse if the Fed decides that we still may be having a problem with inflation and increases the rates some more...

Hope this helps - good luck!

If you have any more questions, just let me know!

[kurty[B]]

Thanks No-Soup, I figured there was much too much involved to really guess what the Fed is going to do.

Decided last night to kind of see what the weather does here. If the ground freezes before they can get the foundation in, then I'll lock in a rate (that would push finshing of the home back into later in the summer). If they are able to get the foundation in, then the home should be finished relatively early in the year, and we decided in that case not to lock in a rate. I'm sure more questions will be coming up.

[oberon]

People can get mortgages under 6% today? Strange, I got one at 6.5% in June and I thought that was pretty good.

[eribrav]

Originally Posted by kurty[B]

Thanks No-Soup, I figured there was much too much involved to really guess what the Fed is going to do.

Decided last night to kind of see what the weather does here. If the ground freezes before they can get the foundation in, then I'll lock in a rate (that would push finshing of the home back into later in the summer). If they are able to get the foundation in, then the home should be finished relatively early in the year, and we decided in that case not to lock in a rate. I'm sure more questions will be coming up.

I think you need to learn more than your friend taught you about mortgages. Stop worrying about what the Fed is doing. Your mortgage rates will roughly track what the 10 year and 30 year bonds are doing, not what the Fed is doing on the short end of the yield curve. You're not looking at doing short term borrowing, so stop being so concerned with the cost of short term borrowing.
The Fed has been raising rates for quite a while. The long end of the curve (ie 10's and 30's) has seen a dramatic FALL in interest rates over the past few months. That's what you need to be focused on. The Fed has the ability to influence the short end; Alan Greespan admitted a few years back that the long end was beyond their control, even though that's often what they're targeting when they manipulate short term rates.