Even though the U.S. economy appears to be on the road to
recovery, the Federal Reserve reports that it will keep low interest rates because
the economy is only growing moderately.
In a statement earlier today after a two-day policy meeting,
the Fed says it will keep buying $85 billion a month in bonds to keep long-term
interest rates low, and encourage more borrowing and spending.
It also says it plans to hold its key short-term rate at a
record low near zero as long as unemployment stays above 6.5 percent and the
inflation outlook remains mild.
It seems that budget policies have restrained growth, but
the sixteen day government shutdown was not mentioned. However, the Fed no
longer expressed concerns about higher interest rates, which has been on
everyone’s radar since September.
The economy added just 148,000 jobs in September, a steep
slowdown from August. The shutdown in October is expected to depress the job
gain for this month. In addition, the shutdown resulted in approximately $25
billion from economic growth this quarter.
Since the September meeting, mortgage rates have fallen
roughly half a percentage point, and remain near historic lows, much to
everyone’s surprise. This comes after
rates jumped this summer, causing some to speculate that the Fed might reduce
its bond purchases. As a result, falling stock and bond prices meant higher
long-term interest rates and wider spreads between the risk-free assets like Treasury
bonds and private borrowing costs for home mortgages or companies looking to
expand. The rate rose from 3.4 percent on a 30-year fixed mortgage to 4.7
percent in September. Right now, rates are at settled in at 4.15 percent.
The budget fight in Congress has clouded the Fed’s timetable.
Though the government reopened on October 17, there are more disruptions and
deadlines ahead. On January 15, another shutdown
is possible. Congress must also raise the debt ceiling by February 7, or else
the government risk default yet again. It
seems likely that the Fed will dial back its bond purchasing in early 2014.
The point is: Go buy a house with leveraged money. Whether
it’s your first house or fifteenth, it’s a good to lock in those low mortgage
rates while you can. Curious what you can afford? Talk to a lender: http://www.nwlistingsearch.com/finance.php
*Excerpted from Time
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