We once again close in on sub 4% money
It has been quite a while since we brought you an update on interest rates. Frankly, there just hadn't been any news to bring you. On April 13th the average overnight rate on a conforming 30 year fixed loan sat at 4.26%. A week ago it sat at 4.28%. There were some moves here and there but nothing dramatic. Then over the past week that changed.
As of today, rates on that same 30 year fixed conforming loan have dropped 22 basis points from last weeks' numbers and sit at 4.06%. That is the lowest rate we have seen since way back on June 16th of 2013. The lowest rate in 62 weeks. We are within a whisker of those rates dropping below 4% that not too long ago seemed to be in the rear mirror view forever.
The Federal Reserve, who has amassed $4.4 trillion in balance sheet debt through their Quantitative Easing programs, has scaled back purchases. From 85 billion monthly to 45 billion. They still say the end of Quantitative Easing will soon be here. Designed to lower rates one would think that be ending the program rates would go up. They did jump about a point in a fairly short period between May and July of last year when the Fed announced they were "cutting back".
In reality, since the Fed actually did start cutting at the beginning of this year rates are down. Significantly lower. In fact they are down a full 50 basis points, a full 1/2 point since January 1st. Down to new 62 week lows. Go figure. When Ben Bernanke announced back on June 19th of last year that the Fed was planning on "tapering" the stock market dropped 4.3% in a couple days. Nothing makes sense when it comes to the cost of borrowing money and we still believe rates are more "artificially controlled" than anyone would believe. We think that rates cannot go up too high or the United States could not meet the interest payments on our massive 17+ trillion, and growing, debt. We keep kicking the can down the road all the while the "fiscal cliff" seems a distant memory but in fact keeps getting bigger.
Trying to follow what might happen is a head spinning, mind numbing game, with no answer. Borrowers should rejoice. Refinancing will soon again be in vogue. Lower rates should help drive more real estate purchases at higher prices. All is good but be careful. Buy a home that you can afford. Lock in long term rates with 20% down conventional loans whenever possible. Times are good but be careful because the can is just being kicked down the road. Always interesting, always fun.
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