We have all heard of the stock market and watched during the news as reporters give a brief synopsis of the current state of the economy. However, this does not always reflect the situation for home buyers or home owners. What many are not accustomed to hearing about is the Bond market and why prospective home buyers or home owners looking to refinance should pay particular attention to the Bond Market.
The Bond market is exactly what the name states, debts are packaged, sold, and traded as security bonds. The Federal Reserve uses the bond market as a tool to improve the economy. In fact, The Federal Government buys $85 billion worth of bonds a month to help grow the economy. When the economy shows improvement the government no longer sees a reason to buy $85 billion in bonds a month and begins a pull back strategy. The impact of this move is seen in interest rates for home loans. When the government decides to no longer purchase bonds, it increases the risk for lending institutions, which translates into an increase in interest rates.
Recently a jobs report came out with bleak news on the state of employment. This translates to weak economic growth, so the likelihood that the government will continue to purchase bonds to help stimulate the economy is good. Consequently a weak economic outlook improved the Bond Market which also affected the rates of mortgages. Indicators such as unemployment statistics, new jobs, home sales, and business growth are just some of the systems monitored that indicate the state of the economy. Hence, if the economy needs some aid the Federal Reserve continues to buy bonds. With an increase in stability of the bond market from the Federal Reserve, the interest rates of home loans decreases.
Last week Kerry Greenwald, owner of Creekside Mortgage, Inc predicted rates would go down and continue this way until the first quarter of next year. Rates are now at their four month low and if you are looking to buy or refinance a home; now is looking pretty good.
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