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Fed Statement Help Mortgage Rates

By
Real Estate Agent with Keller Williams - The Scenic City Team

Thanks largely to Tuesday's Federal Reserve statement, the historic drop in mortgage rates over the last few weeks continued a little further this week.  Lower than expected inflation data from the November Consumer Price Index (CPI) report also was favorable for mortgage rates.  According to Freddie Mac's weekly survey, average 30-year fixeFederal Reserve Rated conforming mortgage rates fell to the lowest level in 37 years. Mortgage rates turned slightly higher late in the week, however, raising the question of whether the downward trend will continue.

In a unanimous vote, the Fed cut the target Fed Funds rate from 1.00% to a range between 0.00% and 0.25%.  The 75 basis point cut was larger than the consensus forecast for a 50 basis point cut.  According to the statement, the Fed will employ "all available tools" to stimulate economic growth. Most notable for the mortgage industry, the Fed mentioned the option of expanding the purchase of large quantities of mortgage-backed securities.  Mortgage rates generally move based on changing levels of demand for mortgage investments. Immediately following the release of the statement, mortgage rates dropped due to this expected increase in demand.

In the housing sector, November Housing Starts fell -19% to a record low. Building Permits, a leading indicator, showed a similar decline. The slowdown in the building of new homes will help reduce the inventory of unsold homes on the market.