FOMC – Page 8 – Joe Gonzalez at CrossCountry Mortgage, Inc.

FOMC Expected To Announce New Stimulus Today

Posted on September 13, 2012 by joeglez

FFR vs 30-year FRM

The Federal Open Market Committee ends a 2-day meeting today, the group’s sixth of 8 scheduled meetings this year. As a King of Prussia home buyer or would-be refinancer, be ready for mortgage rates to change.

The Federal Open Market Committee is a 12-person sub-committee of the Federal Reserve. Led by Fed Chairman Ben Bernanke, it’s the group within the Fed tasked with voting on U.S. monetary policy.

The act for which the FOMC is most well-known is its management of the Fed Funds Rate. The Fed Funds Rate is the interest rate at which banks borrow money from each other overnight. It’s one of several interest rates under Federal Reserve management.

“Mortgage rates”, however, is not among them.

The Federal Reserve does not set or make mortgage rates — Wall Street does. Further, there is no historical correlation between the Fed Funds Rate and the average conforming 30-year fixed rate mortgage rate. At times, the two benchmark rates move in the same direction. Other times, they diverge.

They’ve been apart by as much as 5.29 percent, and have been as near as 0.52 percent.

Today, the spread between the Fed Funds Rate and the 30-year fixed rate mortgage rate is roughly 3.34%. That will change beginning at 12:30 PM ET today. This is the time at which the FOMC adjourns and releases its public statement to the markets.

The FOMC is expected to announce no change in the Fed Funds Rate, leaving it within its current target range of 0.000-0.250%. How mortgage rates throughout Pennsylvania respond to the Fed, though, will depend on whether the nation’s central banker adds new market stimulus in the form of a third round of quantitative easing.

If the Fed adds new stimulus and it’s deemed large enough to be propel the economy ahead, stock markets will gain and bond markets should, too. This would lead mortgage rates lower. Conversely, if the size of the stimulus is deemed too small to be effective, mortgage rates will rise. Maybe by a lot.

What’s Ahead For Mortgage Rates This Week : September 10, 2012

Posted on September 10, 2012 by joeglez

FOMC meets this week Mortgage markets worsened slightly in last week’s holiday-shortened week. As expected, Wall Street took its cues from Europe and from the U.S. jobs market, and mortgage rates moved across a wide range.

Home buyers in Phoenixville and would-be refinancing households were greeted with wildly varying mortgage rates, depending on which day they loan-shopped.

According to Freddie Mac’s weekly mortgage rate survey, 30-year fixed rate mortgage rates averaged 3.55% nationwide last week, with an accompanying 0.7 discount points.

That is, until Thursday’s meeting of the European Central Bank.

The ECB is similar to the Federal Reserve in that, among its primary functions, it provides liquidity to banking systems in times of crisis. Thursday, the European Central Bank intervened with force.

To aid Spain and Italy, the third- and fourth-largest Eurozone economies, the European Central Board launched a bond-buying program meant to reduce speculation that the two nations — and the Euro itself — would fail.

The move calmed investors and sparked a broad equities market rally.

U.S. mortgage rates did not fare so well, however, climbing as much as 0.25% and leaving that “Freddie Mac mortgage rate” in the dust. If you tried to lock a loan Thursday, you may have been greeted with a rate nearing 4.000 percent.

Fortunately, those rising rates were short-lived.

Friday morning, the U.S. Bureau of Labor Statistics released its August Non-Farm Payrolls report and mortgage rates dropped. Far fewer jobs were created in the U.S. than was expected. 96,000 net new jobs were made in July. Wall Street had expected 130,000. This increases the likelihood of new Fed-led stimulus — perhaps as soon as this week.

The Federal Open Market Committee meets for the 6th of eight times this year later this week; a 2-day get-together scheduled for September 12-13. The Fed may announce a new round of market stimulus. If it does, mortgage rates should fall. If it doesn’t, mortgage rates may rise.

Other news affecting potential housing payments this week includes the release of key inflation data Thursday and Friday, and Friday’s Retail Sales data.

Mortgage Rates Dropping After Release Of Fed Minutes

Posted on August 24, 2012 by joeglez

Fed minutes August 2012 Eariler this week, the Federal Reserve released the minutes from its 2-day meeting which ended August 1, 2012. Since the release, mortgage rates have dropped.

The Fed Minutes are released on a schedule, three weeks after the FOMC adjourns from one of its 8 scheduled meetings of the year.

The Fed Minutes are meeting minutes; like you’d see after a corporation shareholder meeting, or after a condo board meeting. Specifically, the Fed Minutes details the conversations among Federal Reserve members which shape our nation’s economic policy.

The most recent Fed Minutes show a central bank closer to adding new market stimulus that previously believed.

At its last meeting, the Federal Reserve’s debate focused on the rate of economic growth and whether it was occurring too slowly to be long-lasting. The Fed appears to think so. Without a “substantial and sustainable strengthening” in the pace of economic expansion, it said, additional monetary stimulus would be “warranted fairly soon”.

Other notes from within the Fed Minutes included :

On employment : Unemployment rates will “decline only slowly”
On housing : The market appears “to have improved, somewhat”
On inflation : Retail energy costs are keeping consumer prices low

However, the Fed expressed an “unusually high level of uncertainty” about its assessments owing to the ongoing European sovereign debt problems. “Spillovers” remain possible and default threats continue to weigh on markets.

The Federal Reserve’s next scheduled meeting is September 12-13, 2012.

Since the minutes were released — and for the first time this month — mortgage rates in Pennsylvania made a big move lower. This is in contrast to the rest of August through which mortgage rates have climbed steadily.

According to Freddie Mac, on August 1, the average 30-year fixed rate mortgage rate was 3.49% nationwide. Today, the rate is 3.66%. Between now and the Fed’s next policy-making meeting September 13, though, mortgage rates are subject to change. If today’s mortgage rates fit your budget, consider locking in.

What’s Ahead For Mortgage Rates This Week : August 6, 2012

Posted on August 6, 2012 by joeglez

Unemployment Rate Mortgage bonds worsened last week in a news- and event-heavy week. A series of non-action from the world’s central banks — including the Federal Reserve — plus a better-than-expected jobs report pushed mortgage rates to their highest levels in more than a month.

Conforming mortgage rates rose in King of Prussia and nationwide last week.

The week wasn’t without drama, however. Mortgage rates carved out a wide range.

When the week opened, mortgage markets were in a rally mode. The European Central Bank had previously said that it would do whatever was needed to preserve the European Union. However, details failed to emerge on that plan, leading to a “risk off” scenario in which investors moved money into the relative safety of bonds, a class which includes mortgage-backed securities.

Mortgage rates dropped Monday and Tuesday.

Then, Wednesday, beginning at 2:15 PM ET, mortgage rates spiked. The timing coincides with the end of the Federal Open Market Committee’s scheduled 2-day meeting and its statement to the markets. In it, the Fed said it will leave the Fed Funds Rate unchanged in its target range of 0.000-0.250%, and that it will not add new stimulus to the markets or the economy.

Wall Street had expected the Federal Reserve to launch new support for bond markets and, when the Fed chose against it, bond markets sold off, sending mortgage rates higher.

Thursday, mortgage rates, once again, slipped. This occurred after the European Central Bank emerged from a meeting with no clear plan to “save the Euro”. Markets believe the ECB will take some action, but because that action won’t happen right away, investors once more poured into the relative safety of mortgage bonds.

Lastly, on Friday, the U.S. Non-Farm Payrolls report showed 163,000 net new jobs added in July, far exceeding analyst expectations of 100,000 net new jobs. The surprise result sent stock markets soaring and bond markets sinking. The 30-year fixed rate mortgage rose all day, and is now at its highest level in close to 6 weeks.

Freddie Mac reported the 30-year fixed rate mortgage at 3.55% last week. It’s higher than that now.

This week, there isn’t much economic data on which for markets to move so expect to see rhetoric and momentum take center stage. Fed Chairman Ben Bernanke makes two public appearances and Eurozone leaders will continue to be in the news.

If you’re floating a mortgage rate right now, a prudent move may be to lock it.

Simple Explanation Of The Federal Reserve Statement (August 1 , 2012)

Posted on August 1, 2012 by joeglez

Putting the FOMC statement in plain English The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday. The vote was nearly unanimous.

Only one FOMC member, Richmond Federal Reserve President Jeffrey Lacker, dissented in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008.

In its press release, the Federal Reserve noted that the U.S. economy has “decelerated somewhat” since January. Beyond the next few quarters, though, the Fed expects growth to “remain moderate” and then gradually pick up.

There was no mention of strain in global financial markets and its threat to the U.S. economy, as the Fed had made in its last two post-meeting press releases.

The Fed’s statement also included the following observations about the economy :

Household spending is “rising at a somewhat slower pace”
Inflation has declined, mostly on lower oil and gas prices
Unemployment rates remain “elevated”

Furthermore, the Fed addressed the housing market, stating that, despite signs of improvement, the sector overall remains “depressed”.

The biggest news to come out of the FOMC meeting, though, was that there was no news.

First, the Federal Reserve is leaving its “Operation Twist” program in place. Operation Twist sells shorter-term securities off the Federal Reserve’s balance sheet, using the proceeds to purchase longer-term securities. This move puts “downward pressure on longer-term interest rates” and makes “broader financial conditions more accommodative.”

Second, the Fed re-iterated its pledged to keep the Fed Funds Rate at “exceptionally low” levels at least through late-2014.

And, third, to Wall Street’s surprise, there was no announcement of a third round of quantitative easing, a market stimulus plan by which the Federal Reserve buys U.S. treasuries and mortgage-backed bonds on the open market. QE3 would have likely led mortgage rates lower.

The FOMC’s next scheduled meeting is a two-day event slated for September 12-13, 2012.

Mortgage markets are rising post-FOMC.

Planning Ahead For The Federal Reserve’s Next Move

Posted on July 31, 2012 by joeglez

Fed Funds Rate v 30-Year Fixed Rate In Washington, D.C. today, the Federal Open Market Committee (FOMC) begins a 2-day meeting, its fifth of 8 scheduled meetings this year.

Mortgage rates are expected to change upon the FOMC’s adjournment. Rate shoppers and home buyers of Phoenixville would do well to be alert.

The Federal Open Market Committee is a rotating 12-person subcommittee within the Federal Reserve. It’s the group which makes U.S. monetary policy.

“Making monetary policy” has many meanings but the action for which the FOMC is most well-known is its setting of the Fed Funds Funds. The Fed Funds Rate is the prescribed interest rate at which banks borrow money from each other overnight.

Since late-2008, the Fed Funds Rate has been near zero percent.

The Fed Funds Rate and Freddie Mac’s 30-year fixed rate mortgage rate move along different paths. Sometimes, the two converge. Other times, they diverge. They’ve been separated by as much as 529 basis points in the past 12 years, and they’ve have been as near to each other as 52 basis points.

Clearly, there’s no correlation between the Fed’s Fed Funds Rate and the common 30-year mortgage. However, with its words, the Federal Reserve can influence the direction in which mortgage rates move — on occasion, by a lot.

We’ll be witness to this Wednesday.

When the FOMC adjourns, it is expected to announce no change in the Fed Funds Rate. Yet, based on the verbiage of the post-meeting statement, mortgage rates will rise or fall accordingly. If the Fed notes that the economy is sagging and that new stimulus is planned, mortgage rates are expected to drop throughout Pennsylvania. This is because new, Fed-led stimulus would be a boon for mortgage markets which would, in turn, drive mortgage rates down.

Conversely, if the Fed acknowledges growth in the U.S. economy and/or little need for new stimulus, mortgage rates are expected to rise.

Either way, expect rates to change — we just can’t know in what direction. The FOMC adjourns at 2:15 PM Wednesday.

Fed Minutes Suggest Fiscal Stimulus Later This Year

Posted on July 12, 2012 by joeglez

FOMC Fed Minutes The Federal Reserve released the minutes from its June Federal Open Market Committee meeting, revealing a Fed divided on the future of the U.S. economy. Mortgage rates are higher after the release of the minutes.

The Fed Minutes is the detailed recap of an FOMC meeting. It is the companion piece to the more brief, more well-known post-meeting FOMC press release.

For a comparison, whereas the Fed’s June 20, 2012 press release contained 5 paragraphs and 490 words, the same meeting’s minutes contain 62 paragraphs and 7,508 words. The extra detail afforded by the extra words Wall Street gives insight into the nation’s central banker.

The June Fed Minutes, for example, suggest that the Fed may soon add new economic stimulus.

Recent data suggests that the U.S. economy is expanding, but more slowly that it was at the start of the year. The Fed acknowledged that this, in part, is the result of “below-trend” growth in Euro-area economies, plus a general slowdown in China.

The Fed also said that “strains in global financial markets” continue to pose “significant downside risks” to the U.S. economy. The Fed expects U.S. growth to “moderate over coming quarters”.

Other notes from with the Fed Minutes included :

On housing : Home sales, construction and prices suggest improvement
On inflation : Prices are stable, and inflation will remain “subdued” through 2014
On new policy : Rapid fiscal tightening poses a “downside risk” to the economy

In addition, there was discussion about whether the Fed is missing its dual mandate of low inflation and low unemployment. Several Fed member discussed the need for new stimulus to raise employment and to raise the rate of inflation. This action could occur as soon as next month.

If the stimulus was enacted, mortgage rates would likely rise because inflation, in general, is a threat to low mortgage rates.

The next Federal Open Market Committee meeting is a 2-day affair scheduled for July 31-August 1, 2012.

What’s Ahead For Mortgage Rates This Week : June 25, 2012

Posted on June 25, 2012 by joeglez

Fed Funds Rate 2006-2012 Mortgage markets worsened last week as Greece tentatively formed a government and the Federal Reserve extended its Operation Twist program by $267 billion.

Neither event, however, removed the uncertainty surrounding global markets.

First, Greece must still adhere to stringent austerity measures in order to meet the terms of its IMF bailout. Its new government, however, may seek to revise the terms of its fiscal austerity, a move that would keep the nation-state — and the European Union — in fragile balance.

As Greece comes closer to resolution, U.S. mortgage rates are likely to rise. This is because economic uncertainty in Greece has helped to keep mortgage rates down since 2010. A reversal in policy would cause mortgage rates to reverse higher.

Second, it’s clear that Wall Street expected more from the Federal Reserve.

The nation’s central banker made moves to pressure long-term rates lower last week, but did little else to prop up an economy it believes will grow only “very gradually” over the next few quarters. Stock markets got a gentle boost from the Fed’s new stimulus, and mortgage rates suffered only slightly.

Overall, conforming mortgage rates in Pennsylvania rose slightly last week, and much of the action occurred after Freddie Mac’s weekly mortgage rate survey concluded Tuesday afternoon.

According to the government-backed mortgage-securitizer, 30-year fixed rate mortgage rates fell 5 basis points to 3.66% nationwide, on average last week. This was the lowest recorded 30-year fixed rate mortgage rate on record as this year’s Refinance Boom continues.

The 15-year fixed rate mortgage rate also dropped, stopping at 2.95%, on average. This is 0.01 higher than the benchmark rate’s all-time low — a record set two weeks ago.

Buyers and would-be refinancers trying to lock a rate this morning may find pricing to be slightly worse.

This week, mortgage markets will continue to take cues from Europe, and from a bevy of U.S. economic data including the New Home Sales report and the release of the Pending Home Sales Index.

Mortgage rates remain near all-time lows. If you’re considering a home purchase or refinance, the timing looks good.

A Simple Explanation Of The Federal Reserve Statement (June 20, 2012)

Posted on June 20, 2012 by joeglez

Putting the FOMC statement in plain English The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday.

For the fifth consecutive meeting, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member, Richmond Federal Reserve President Jeffrey Lacker, dissented in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008.

In its press release, the Federal Reserve noted that the U.S. economy has been “expanding moderately” this year. Beyond the next few quarters, the Fed expects growth to “pick up very gradually”.

In addition, the Fed re-acknowledged that “strains in global financial markets” continue to pose “significant downside risks” to the U.S. economic outlook. This statement is a repeat from the FOMC’s April press release and is in reference to the sovereign debt concerns of Greece, Spain and Italy, plus the potential for a broader European economic slowdown.

The Fed’s statement also included the following economic observations :

The housing sector remains “depressed”
Labor conditions have “slowed in recent months”
Household spending is “rising at a somewhat slower pace” than earlier this year

With respect to inflation, the Fed said that pressures have declined, led by falling oil and gasoline prices. Longer-term inflation expectations remain stable.

The biggest news of the FOMC meeting is that the Federal Reserve will be extending its “Operation Twist” program. The program sells shorter-term securities on the Federal Reserve’s balance sheet and uses the proceeds to purchase longer-term securities. This move puts “downward pressure on longer-term interest rates” and makes “broader financial conditions more accommodative.”

The Fed also pledged to keep the Fed Funds Rate at “exceptionally low” levels at least through late-2014.

Mortgage markets are muted post-FOMC. There has been no real change in rates, although that may change later in the day, or weel. Mortgage rates in King of Prussia remain at all-time lows.

The FOMC’s next scheduled meeting is a two-day event slated for July 31-August 1, 2012.

What’s Ahead For Mortgage Rates This Week : June 18, 2012

Posted on June 18, 2012 by joeglez

FOMC meets this week Mortgage markets improved last week, moving mortgage rates in Pennsylvania back on a downward trajectory. Wall Street investors bid down mortgage bond yields on weaker-than-expected economic data from the U.S. and concern for events within the Eurozone.

Freddie Mac reports the average 30-year fixed rate mortgage rate at 3.71% for borrowers willing to pay 0.7 discount points plus accompanying closing costs.

It’s the second-lowest reading in Freddie Mac’s recorded history and, as a point of comparison, one year ago, the 30-year fixed rate mortgage averaged 4.50% nationwide.

A homeowner giving a $200,000 mortgage at last year’s 4.50% rate would have paid $1,013 monthly for principal + interest. Today, that same homeowner pays just $922 per month — nine percent less.

Mortgage rates may drop even more this week.

Sunday, in Greece’s bid to re-elect a government, a pro-bailout party won the most votes in a highly-watched election, dampening fears that Greece may leave the European Union. However, the winning party must still form a new government and it beat the “anti-bailout” party by just 3 points — 30% to 27%. Some analysts question whether Greece can form a coalition government within its required 3-day window.

If Greece fails to form a government, the nation-state’s future in the European Union will, again, be in doubt — a potentially positive development for U.S. mortgage rates.

Also this week, the Federal Open Market Committee meets for its fourth scheduled meeting of the year, a two-day event beginning Wednesday. The FOMC doesn’t set mortgage rates, but it does set U.S. monetary policy which can have an effect on mortgage rates. If the Federal Reserve votes to add new stimulus, mortgage rates may rise on concerns for inflation.

The FOMC is not expected to add new stimulus.

And, lastly, this week will see the release of several housing reports including the homebuilder confidence survey, the Existing Home Sales report, and the Housing Starts report. Strength in housing may be viewed as a plus for the economy, which can cause mortgage rates to rise.

Expect volatility this week as mortgage markets wrestle with events at home and abroad. This may be aprudent time to lock a floating mortgage rate.