The Federal Reserve begins its scheduled two-day meeting this morning.
It’s one of 8 scheduled meetings for the Federal Open Market Committee this year.
When the FOMC meets, it discusses the financial and economic conditions around the country and, when appropriate, the group makes new policy meant to speed up or slow down the economy.
The main tool for reaching this goal is the Fed Funds Rate and, earlier this year, the FOMC lowered it to “near-zero” percent in an attempt to stimulate growth.
But the Fed has other tools at its disposal, too, not the least of which is its $1.25 trillion pledge to the mortgage markets.
Now, if you’ll remember, the Fed made that pledge in two parts:
After each announcement, mortgage rates reflexively dropped and stayed low for a period of a day or two. Then, fears of inflation set in on Wall Street, causing mortgage rates to pop back up because inflation is a mortgage-rate killer.
The Fed isn’t expected to increase its mortgage market commitment this week, but because mortgage rates are above the government’s “target zone”, it’s possible that the FOMC uses its post-meeting press release to give markets some guidance and its plan for the next several months.
A statement like this could alternately raise mortgage rates or lower them, depending on what the Fed says.
It’s for this reason that floating a mortgage rate through tomorrow afternoon is extremely risky. The Fed could say nothing about mortgages, or it could say a lot. Either way, a small, quarter-percent change in mortgage rates can add tens of thousands of dollars to the lifetime cost of a person’s pending home loan.
The Fed’s press release hits the wires at 2:15 PM ET Wednesday. If you’re the cautious type, consider locking your mortgage rate prior to its release.
That rates have been all over the place this year and I don’t see us returning to sub 5% this year. I would encourage you to lock you rate NOW if you currently have a Knoxville house under contract. I just had a couple of clients who where playing the floating game and lost. Their rates popped up a half a point while floating the rate. We have GREAT rates right now in the Knoxville housing market. Play it safe and lock those rates!!! If you have any questions feel free to call me at 865-696-9002 or [email protected]
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