subject: Could Latest Quantitative Easing Bring Down Refinance Home Mortgage Rates Slightly? [print this page] Could Latest Quantitative Easing Bring Down Refinance Home Mortgage Rates Slightly?
Injecting extra money into the economy to vitalize it is the plain narration of quantitative easing. The more cash in circulation, the more people buy merchandise and services. Thus, the factories will produce more and hire more work force leading to increase in employment rate in the country.
Broadly awaited QE II is finally revealed. The Federal Reserve will be buying more government papers and mortgage backed securities. The amount of the Federal Reserve spending will depend on many determinants and the future expenditure and its influences will be seen in subsequent months. The Federal Reserve determines short term interest rates, such as the federal funds rate which is the rate banks charge each other for overnight funds. But longer term interest rates such as the fixed rate for fifteen to thirty year mortgages are determined by market conditions.
Clearly the Federal Reserve can affect these rates by actively participating in these markets. This will produce a healthy demand for these types of products that will force up the price and move down the rate of return. Expectedly the consequence would be that mortgage rates come down extra encouraging refinance applications and improving the real estate valuations.
First responses were that the mortgage rates have actually risen. The easy explanation for this turn might be that the market was anticipating quantitative easing by the Federal Reserve and it seems that they were awaiting further than what was committed. In addition analysts could expect that the Federal Reserve is giving a signal to encourage the economy, but they might be slow to let the money out freely. That is why there are wide speculations as to how much ultimately the Fed will put out. Unfortunately, it seems that billions of dollars scarcely leave a scratch in the today's economy; it might be time to be talking in trillions.
At least one worry could be the inflationary effect of quantitative easing. That would pressure the mortgage rates up. This would be seen in the advancing months and years.
In line with your risk philosophy, you might determine what you are going to do with refinancing your home loan. The uncertainty may be distressing you and it may be time for you to have some positive assurance in your life with a fixed rate home mortgage refinance. Alternatively, you might be planning to find out how far down the rates could drop before you are convinced to refinance. There are various mortgage products in the market that you might want to have a knowledge in the meantime. You may further desire to determine the most favorable home loan lenders in your state well ahead of an expected refinance undertaking.
