It looks like September is going to go full circle, with mortgage rates falling back down this week after a month-long rise in rates.
There’s a hodgepodge of pertinent economic news that may have had an impact on rates, but it’s just as likely that mortgages rates are taking a breather after several weeks of higher rate activity.
The Federal Reserve used its Open Markets Committee meeting last week to say it’s keeping interest rates right where they are, at historically low levels. Right now, the key Fed Funds rate is at 0%-0.25%.
The Fed acknowledged the economy has been losing steam over the past few months, held back by high unemployment and low consumer confidence. While the National Bureau of Economic Research, the official arbiter of when recessions begin and end, announced last week that the economic downturn officially ended in June 2009, there is a big caveat. Consumers — especially those without jobs, or who remain “under-employed” — may nod to the NBER’s wisdom and say that the recession is over, but they don’t yet believe their recession is over.
Until consumers change that mindset, don’t look for a big run-up in spending, which would help tamp down any big economic recovery, and likely keep rates low.
The news isn’t all bad, however. One sector of the economy that’s beginning to spend again is the business sector. The Fed noted this, and it’s helping the economy grow nationally, albeit at a lower growth rate than at the beginning of 2010.
Here’s the official statement from the Fed’s Open Markets committee meeting last week: "Information received since the Federal Open Market Committee met in August indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak.”