Mortgage rates plummeted this week after experiencing increases late last week.
The reason: a very encouraging message from the Federal Reserve, at least as far as interest rates go.
The group said it would keep its benchmark rate — the federal funds rate — near zero through 2022. That’s two and a half more years of a low-rate environment in which super low mortgage rates might also linger.
Fed agrees: Rates aren’t rising any time soon 👍
- Admittedly, the reasons for the current low rate environment are nothing to cheer about.
- The Fed’s interest rate policy is based on wildly uncertain economic times for the foreseeable future.
- Coronavirus has ravaged the U.S. economy and led to record-high unemployment. Worldwide, things aren’t much better.
- The silver lining, though, is a Fed that unanimously favors a fed funds rate near 0%. The Fed doesn’t control mortgage rates, but the group sure can help them stay low.
- In a rare show of solidarity, every single Fed member predicted low rates through 2021, with only two dissenters saying rates would rise in 2022.
Your next move as a mortgage shopper!
- As mentioned, mortgage rates don’t follow the federal funds rate perfectly. Mortgages could get more expensive even as the Fed uses its full power to keep all rates low.
- With that argument, those seeking to purchase a home or refinance shouldn’t wait. Rates are near 50-year lows right now, and it will be hard for them to go lower.
- But if you’re in the market to buy or refi in coming years, be encouraged.
- Many people are working to raise their credit score, advance their career, or set a budget. In these cases, they can likely breathe a sigh of relief. Low rates will probably be a round in a year or two when they are ready.