Federal Reserve, FOMC

A Mortgage Rate Strategy Ahead Of The Fed’s Meeting

June 22, 2010 by · 2 Comments 

The Federal Open Market Committee begins a 2-day meeting today, its fourth scheduled meeting of the year, and fifth overall.

The FOMC is the monetary policy-setting part of the government and its primary tool for that purpose is the Fed Funds Rate

The Fed Funds Rate is the dictated rate at which banks borrow money from each other and, since December 16, 2008, the Federal Reserve has voted to keep the benchmark rate within a target range of 0.000-0.250 percent.

This is the lowest Fed Funds Rate in history. A rate near zero-point-zero percent renders borrowing by business and consumers cheap which, in turn, promotes investment and growth.

There’s no expectation for the Fed to change the Fed Funds Rate after it adjourns tomorrow, but that doesn’t mean consumers in Munster Indiana should expect mortgage rates to remain unchanged, too.

To the contrary, mortgage rates tend to be volatile when the FOMC is meeting.  This is because the FOMC issues a press release after each meeting and in that press release, it comments on the economy’s unique threats, strengths and weaknesses.

When the FOMC speaks, Wall Street listens. 

The words of the Chairman Ben Bernanke’s press release will be dissected and analyzed.  A single mention of higher-than-expected inflation levels, or better-than-expected growth, and traders will rush to dump their bond positions in favor of equities. 

This has a negative effect on mortgage rates.

Conversely, if the Fed is sour on the economy, mortgage rates may fall.

We can’t know for sure what the Fed will say or do tomorrow afternoon so if you’re floating a mortgage rate and wondering whether to lock, the safe choice is to lock prior to 1:15 PM CST Wednesday.

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James K Barath, CMPS®

James K Barath is a Certified Mortgage Planning Specialist®, Certified FICO® Professional, Certified Military Housing Specialist® and your FHA Home Loan Expert. He is also a graduate of Purdue University, The CMPS Institute, Dale Carnegie Human Relations Course & Napoleon Hill Foundation's PMA Science of Success Class. It's your home and your future. It's his profession and his passion. He is ready to work for your best interest. Contact James for your FREE Home Loan Approval !  His Motto: I Facilitate the American Dream Through Responsible Mortgage Lending and Financial Literacy!

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2 Responses to “A Mortgage Rate Strategy Ahead Of The Fed’s Meeting”
  1. James, it’s an odd combination of economic factors right now. In my mind we’re improving ever so slightly … with very very slow job creation. But European debt (with scary prophetic implications for us) and this oil spill are helping these rates stay low abnormally long. How long though? I have two houses going now, and can’t lock the customers until 90 days out right? Crossing my fingers.


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