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 (FOMC) adjourned their two day meeting with a reduction in the Fed Fund rate.  The prime interest rate, which is the primary factor that determines home equity loans, consumer credit cards, etc will likely follow tomorrow coming down to 3.25%.

Thus far in 2008 we’ve seen the prime rate drop several times, unfortunately each resulting in slightly higher mortgage rates.  The trend for rates to increase is usually temporary, but it’s important to note the reduction in the prime interest rate does not mean a reduction in the 30 year fixed mortgage rate. However, in today’s economic environment, it is very difficult to determine what the “normal” reaction is to anything.  This afternoon mortgage rates held steady at morning levels and the bond market finished in positive territory which may indicate lower rates on Wednesday.

The announcement by the FOMC did include the key statement that it will use “all available tools” to generate a resumption in growth.  This positive statement is likely the factor driving the bond market to finish in positive territory.

With so many variables in the rate envrionment today, it is most important to be prepared.  As I wrote last week, now is the time to make a move if you’re thinking you need to refinance or if you’re shopping for a loan.  Don’t forget, opportunities are never lost…someone will take the ones you miss!