Today the Federal Reserve Board announced they will not be raising the federal funds rate.  The rate will remain at zero to .25 percent.  More importantly to the mortgage rate market they announced that they will extend the purchase of mortgage backed securities (MBS) until the end of the year through March 2010.

The implementation of MBS purchases by the Feds on November 26, 2008 has helped mortgage rates remain historically low for nearly a year.  The low rates have been a healthy companion to the first time homebuyer tax credit in 2009.  These two government sponsored tools explain the increase in housing activity this year.

The good news for now: there is still time to make an offer and qualify for the first time homebuyer tax credit and rates will likely remain low as long as the government is throwing $10-$20 billion, yes billion, a week to the MBS market.

As always, if you have questions about current rates or a scenario, give me a call or shoot me an email.

Today the Federal Open Market Committee unanimously voted to reduce the benchmark rate to 1%.  The prime interest rate (rate consumers borrower at) will likely follow.  The .5% dropped brings the fed funds rate to a half a century low.

The Feds have made the move to correspond with recent actions to help our hurting economy.  The committee stated, “there are still downside risks to growth”, knowing that we are still going to experience a slowing period.

It is important to remember that the prime interest rate is reflected in consumer debt and some installment loans.  The benchmark rate is the rate at which the banks borrower funds from the fed overnight.  Mortgage rates have seen a slight increase since the announcement today and may settle in the coming days.

Today the Federal Reserve, the European Central Bank, the Bank of England, and the Swiss national bank announced they will lend an unlimited amount of funds to commercial banks in an effort to revive the financial markets worldwide.  The Feds lead the way in the unprecedented event that backs the governments recent intervention.

In response to the central banking announcement the Dow rebounded with an advance of 936 points, the largest gain in 70 years.  The gain marked a sign of confidence in our financial system.  A single positive day does not prove a total revival coming in our market by any means, but investors have some hope in sight after an advance of this margin.

The week ahead will prove to make history yet again.