The Federal Reserve begins its scheduled two-day meeting this morning. No telling what this will mean to hundreds of Salt Lake Home Buyers, that have yet to lock in a firm mortgage rate.

The meeting is 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:

• Part 1 came in November 2008 for $500 billion
  
• Part 2 came in March 2008 for $750 billion
  

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. You can see what this could do to the purchase of that New Town-home in Daybreak, or that home listed in Sandy UT. that you were going to buy. 

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.

If you don't have a loan or a lender, but do have a Salt Lake home you want to buy go to our website, click on Salt Lake Home Loans and have them get to work on financing your new Salt Lake City Home.

Published Tuesday, June 23, 2009 7:08 AM by Corie Seymour Filed under: Real Estate, Utah, Salt Lake