Mortgage rates broke a week-long streak of silence today following a policy announcement from the Federal Reserve.
Today, the Federal Reserve (FED) announced a significant change in its loan portfolio policy consisting of Treasuries and Mortgage-Backed-Bonds. They decided to slow the pace of the decline in reserves over coming quarters provided that the economy and money market conditions evolve about as expected.
The FED intends to slow the reduction of its holdings of Treasury securities by reducing the cap on monthly redemptions, from the current level of $30 billion to $15 billion beginning in May 2019. The FED intends to conclude the reduction of its aggregate securities holdings in the System Open Market Account (SOMA) at the end of September 2019. The FED intends to continue to allow its holdings of agency debt and agency mortgage-backed securities (MBS) to decline, consistent with the aim of holding primarily Treasury securities in the longer run.
This means the FED will be buying more bonds more quickly. And bond buying results in lower rates, all other things being equal. This new pressure over lower rates will have a good impact on the purchase of houses in the next six months.
This new comes in a good moment. Fannie Mae’s March Economic Developments report is predicting the economic growth will slow from 3.1% in 2018 to 2.2% in 2019. The economists see the boost from the Tax Cuts and Jobs Act fading, business investment and consumer spending slowing, and a number of other factors, including several global ones and others related to trade. They also see the risks to their forecast being primarily on the downside, although some of those risks have lessened over the last month.
If you are planning to buy a new home, don’t forget to get a pre-approval letter from your loan officer. If you don’t know anyone and you are willing to receive suggestions, feel free to contact me to provide you some good loan officer names. With the pre-approval letter, we can start looking for good home deals..! Call or text me at (323) 942-9347.
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