Low Mortgage Rates Through 2014?

When shopping for real estate

Federal Reserve Open Market Committee comments

The Federal Reserve Open Market Committee

Last week, the Fed made some interesting comments in its press release

• The Federal Funds Rate would remain unchanged at zero to 0.25 percent.
• Despite signs of improvement, the housing market remains depressed.
• It will continue “Operation Twist
• Market conditions are likely to warrant exceptionally low levels for the Federal Funds Rate at least through late 2014.

Applying for a Mortgage: What Lenders Can and Can’t Ask

---

Federal Funds Rate vs. the mortgage rate

When the Fed decides to lower interest rates, it lowers the Federal Funds Rate — the rate at which banks can borrow money from the Fed. Note: This rate is not the mortgage rate

But while the Fed doesn’t set mortgage rates, the panel’s actions and comments do influence the mortgage market. When the Federal Reserve speaks about the economy, the market listens very carefully and prices of mortgage-backed securities change accordingly.

Expect low rates through 2014

Based on the comments from the last FOMC meeting, the economy is slowing. The Fed expects to leave the Federal Funds Rate at an exceptionally low level through at least late 2014 and has a couple of tools it can use (such as Operation Twist) to keep interest rates low while keeping inflation at bay.

All of which will loosely translate into mortgage rates remaining low for the foreseeable future.

Last week, the 30-year fixed mortgage ratenew record low of 3.34 percent

 Read More From Zillow.com:

• HARP Refinancing Is Really Happening
• HARP Guidelines: What You Want to Know
• Have an FHA Loan? It Might Make Sense to Refinance in 2012

  Justin McHood is America’s Mortgage CommentatorFacebookTwitterLinkedIn