The Federal Reserve announced Wednesday that they would continue their asset purchases at the rate of $85 billion per month. Ben Bernanke, chair of the Federal Reserve said that there is no calendar for when they will begin to pull back from their asset purchases, but that it’s all based on the data.
What will allow the Fed to begin the pullback is a “significant improvement” in the market. There are a few key indicators that help the Fed decide if there has been improvement. One of those indicators is the unemployment rate. It’s currently right around 7.3 percent and the Fed said they would like to see it closer to 6.5 percent. The Fed would also like to see a rate of inflation get up to 2 percent as a goal to start looking at pulling out.
The goal of the Fed is to pullback its asset purchases in such a way that it will not dramatically affect the market. What that means is that if the Fed does begin to start pulling back, and the market overreacts, the Fed would then make an adjustment to compensate. Their goal is to make things move as smoothly as possible.
So the big question is, what does this mean for mortgage rates? Well it should be good. Rates should make a slight adjustment because it had anticipated that today would be the announcement of the pullback. We’ve already seen improvements and many experts believe they will continue to improve.
This means that the Fed has bought buyers a little bit more time to get low rates, making it an ideal time to go out there and try to find a home before the Fed officially begins it’s pullback. As always, we recommend speaking with your lender early on to find out what you qualify for and then begin your house search.