There was much media rumbling over last week’s Federal Reserve of San Francisco study — the one that reported the Fed likely wouldn’t raise interest rates until 2011 — or even 2012.
If true, that’s a bitter pill for bank deposit investors to swallow. But it’s great news for potential homebuyers looking for low mortgage rates to finance a home.
Yes, the more it seems that low mortgage rates are here to stay for the remainder of 2012. Sure, they may rise every once in a while — although that was certainly not the case this week, according to the BankingMyWay Weekly Mortgage Rate Tracker. But the tea leaves are certainly beginning to indicate that lower rates, like your in-laws visiting over the Fourth of July weekend, are in for an extended stay.
The Federal Reserve holds a great deal of sway over global interest rates. Consequently, when the Fed releases a paper suggesting that rates should remain low, that’s going to set economists and certain financial writers clucking. The big question is this: Why keep rates low for so long?
The answer from the Fed paper is this: U.S. unemployment data. That’s hardly a surprise — there’s little doubt that with too many Americans out of work, the economy will have a tougher time gaining traction. But the Fed paper digs way deeper than that. It calculates that inflation — the official bugaboo of economists — is closely tied to the unemployment rate.
To cut to the chase, the Federal Reserve of San Francisco found that consumer price inflation numbers were so awful in 2008 and 2009, to keep pace, the Fed would have had to cut interest rates below zero. That’s obviously impossible. But what the Fed can do is keep interest rates as low as possible (they’re barely above zero right now) until the consumer inflation index rebounds to near some level of normalcy.
The date for that happening? 2012, according to the Fed paper. That’s why Federal Reserve economists out in San Francisco recommend keeping rates low until (possibly) 2010. The entire Federal Reserve paper is worth reading.
While the Federal Reserve does meet June 22, there are few economists calling for a major rate boost. So, if you’re looking for a new home, the future really is right now.
Back to the numbers. For the week ending June 18, fixed mortgage rates continued their long slide, while some variable rates did move upward. Here’s a look at freshest numbers from the BankingMyWay Weekly Mortgage Rate Tracker.
Description This Week Last Week
One-Year ARM 3.741% 4.309%
Three-Year ARM 4.256% 4.099%
Five-Year ARM 4.046% 3.987%
15-Year Mortgage 4.312% 4.353%
30-Year Mortgage 4.847% 4.906%
Great mortgage rates remain out there, and to a buyer with some cash for a down payment and a good credit score, it’s a lot like shooting fish in a barrel. Load up at BankingMyWay’s Mortgage Rate Search. Week-to-week, it’s your best bet for finding the best mortgage rate deal possible.
—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.