Mortgage rates held steady last week and even dropped a bit following the two-day Fed meeting that took place. The major news coming out of the meeting is that the Fed made a change in its policy language which many believe opened the door for a rate hike later this year. However, Federal Reserve Chairwoman Janet L. Yellen said despite the change in the policy language the Fed will be in no rush to raise rates for the first time since 2006.
The Fed in its meeting last week didn’t make any major changes to its monetary policy which is probably why the financial markets breathed a big sigh of relief. What did happen though which was significant on many levels is that the Fed removed the word “patient” from its policy language which spooked some analysts who believe that this action is a precursor to an inevitable rate increase.
While the Fed may indeed raise rates in the future the removal of the word “patient” from the official policy language according to Federal Reserve Chairwoman Janet L. Yellen does not mean that the Fed will be raising rates in the short term. The Fed acknowledges that the economy is certainly improving but there still is a worry that wage growth has remained stubbornly constant and is relatively unchanged from previous months.
There are other factors troubling the Fed about the economy and high on the list is the number of folks who still remain out of the job market for various reasons. Many of these folks have been looking for a job for so long that they have given up hope that there is a suitable job out there for them. The long term unemployed simply want a job that uses their skills and training and pays a living wage that would allow them to cover their monthly expenses.
Real estate professionals thought for sure that the Fed altering its policy language would move mortgage rates in a negative direction but that did not end up being the case. Mortgage rates held steady mid-week and even edged down towards the end of the week. Mortgage rates are still near their 18 month lows keeping housing affordability at peak levels. A year ago at this time rates were about 4.5% for a 30 year fixed rate home loan. Through Friday, the rate on a 30 year fixed rate Conventional loan was about 3.875% for borrowers with good credit.
The first quarter of 2015 has been excellent for home buyers in the market to buy a home. If mortgage rates remain at current levels then economists are forecasting a strong spring housing season as consumer confidence is starting to return and folks are more willing to commit to large purchases.
This article “What the word “Patient” means for Mortgage Interest Rates” was written by Stephen Khan. Stephen is a mortgage loan officer based in the Phoenix, Arizona area and in addition to his loan officer duties he enjoys writing about mortgage related topics that help home buyers better prepare themselves to buy a home. For more information on mortgage programs and the entire loan process you can visit Stephens’s home mortgage website for more information or to contact Stephen directly.