This Florida mortgage update represents my attempt to provide some insight into the latest Federal Open Market Committee (FOMC) results released today. As expected, the FOMC voted to leave the Fed Funds Rate the same – ranging between 0.000-0.250 percent. It also reaffirmed its plans to bolster the mortgage market with some $1.5 trillion in backing.
In its press release, the FOMC stated that our nation’s economy is “picking up following its severe downturn” and that financial markets have “improved further.”
With this statement, we’re starting to see a positive trend, as this is the second consecutive post-FOMC statement in which the Fed appears somewhat optimistic — a signal that the recession will end soon, or has already ended.
Still, the economy is soft in places – a statement the Fed made very clear. Though things are looking up, each of these key areas could pose considerable risk to economic recovery:
- Continuing job losses
- Lackluster income growth
- Constrictive credit conditions
Buying Mortgage Backed Bonds to Support the Home Loan Industry
The Fed also confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to honor its $1.5 trillion commitment to the mortgage bond market. However, this buy back will take place over an extended period of time – running through March 2010. The buy back is basically an attempt by the Fed to keep mortgage rates from rising too much as the economy picks up speed. Remember – as the U.S. economy grows stronger, mortgage rates will rise. This is because investors will begin pulling money from bonds (which they feel are safe bets) and putting it into stocks (which are riskier as a rule).
Market reaction to the Fed’s press release is positive. After an early day sell-off that drove rates higher by about a quarter-percent, most of the pressure is easing. Pricing was worse on the day overall, but well off its lows.
The FOMC’s next scheduled meeting is November 3-4, 2009.
I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage broker, I’m your guy. Call me at 863-604-3019 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!
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I’m glad the economy is picking back up. I say give it two more years, and everything will be back to normal or even better then it was before this whole downturn in the economy.