The Federal Reserve sets the Fed Fund rate. This is the rate that banks pay when they borrow from the treasury. This is important to perspective home owners because mortgage rates follow the Fed Fund rate.
The Federal Reserve sets the rate with two goals in mind. They are charged with keeping inflation in check and to strive for full employment. The Federal Reserve operates on the principal that higher interest rates make it harder for business to expand but reduces inflation. Conversely, lower interest rates reduce unemployment but can lead to inflation.
We currently have high unemployment and low inflation. In response, the Fed Fund is 0.25%. It can’t get much lower.
The Federal Reserve will announce their new rate. The announcement is expected to be boring…no change. This means that mortgage rates will remain low for at least a while, and low mortgage rates mean more affordable homes. If you are thinking about buying your first home, this may be the ideal time. Prices are down and mortgage rates are low. It is a buyers market.
