Thursday, September 22, 2011

Fed’s Latest Move May Send Rates Lower

The Federal Reserve announced Wednesday it will invest $400 billion in long-term Treasury securities over the next nine months, which is expected to send interest rates on mortgages even lower. The Fed’s move is yet another attempt to try to stimulate economic growth, which has faced stagnation in employment, housing, and household spending over the past couple of years. "This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative," the Fed said in a statement Wednesday. Mortgage rates have already been reaching record lows in recent weeks, but the Fed’s latest efforts are expected to send rates dropping even further. Economists predict that interest rates could drop by a few tenths of a percentage point, which would be significant to anyone getting a loan to purchase a home. However, tough lending standards remain an obstacle that is keeping many home buyers on the sidelines. Banks have tightened their lending standards, which have made even some buyers with good credit struggle to qualify for the best rate. Source: “Fed Will Shift Debt Holdings to Lift Growth,” The New York Times (Sept. 21, 2011)

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