Feds Sticking With Low Home Loan Interest Rates: How It Affects You
It looks like historically low home interest rates will be here for the foreseeable future — great news for folks in Texas looking to buy a new home.
Federal Reserve policymakers are expected on Wednesday to keep interest rates at their historic lows and to make no plans for a third round of quantitative easing after the second round ends on June 30.
They’ll keep the supply of bonds that they hold relatively stable, and that will help keep intermediate- to longer-term interest rates low,” he predicted. “As interest rates stay low, that will hopefully encourage lending, and that lending will encourage growth in the economy. The Fed’s primary tool is monetary policy and interest rates, and they’ve really done everything they can to keep interest rates low.”
The Federal Open Market Committee (FOMC) meeting will be its first since April 27 when it maintained the federal funds rate at 0% to 0.25% and said that conditions in the U.S. economy “are likely to warrant exceptionally low levels for the federal funds rate for an extended period.”
Got it? Gibberish? We’ll explain:
What the Federal Reserve does matters to folks in need of a Texas home loan for several reasons. Primarily, however, it’s because Texas home purchase loan rates and Texas home refinance rates tend to rise and fall almost exactly alongside the Fed’s rates.
Here’s why — in an oversimplified (but hopefully helpful) nutshell:
Interest rates rise when money in the economy gets tight. In a weak economy like the current one, when overall consumption is still far below where it needs to be to sustain a full recovery, the Fed wants to keep interest rates low to make it easier for folks to get loans and start businesses, use credit cards, and buy homes. To achieve this, the Fed increases the money supply, which lowers rates by limiting competition for the available dollars.
This can lead to inflation, debt, and dangerous currency devaluation on the global market if its not carefully controlled, which is why the Fed will eventually reverse course and try to shrink the money supply following an economic recovery.
In other words, eventually federal interest rates will rise, and home loan and home refinance rates will as well. But, if the Fed’s recent moves tell us anything, we’ll see historically low home interest rates for a while longer.
This is excellent news for Texas folks in need of a home loan, home equity loan, or home interest loans. Interest rates are anchored to the rock bottom, and here at Texas Lending, we’re offering the lowest home interest rates of anywhere in the Texas.