The Fed Announces QE3 : What Does This Mean for Home Loan Rates?

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The Fed Announces QE3 What Does This Mean for Home Loan Rates? On September 13, 2012, the Fed announced another round of Mortgage Bond buying, known as Quantitative Easing or QE3. This could have a big impact on anyone looking to purchase or refinance a home. Here's some important information to know and to share: What is Quantitative Easing? Quantitative Easing is the concept of the Fed becoming a buyer of Treasuries and bonds to try and stimulate the economy. Oftentimes, the Fed does Quantitative Easing when they are hoping to (1) create inflation and avoid a deflationary economy, (2) lower the unemployment rate, and (3) boost Stock prices. Why did the Fed announce QE3? With our economy still struggling (especially our housing and labor markets) and inflation appearing tame, QE3 was widely expected. Over the next several months, at the very least the Fed will be buying Mortgage Bonds at an annual rate of nearly $800 Billion. The Fed also noted that QE3 will continue until there is a self-sustainable recovery in our economy, as long as inflation doesn't rise too high or quickly. What does QE3 mean for home loan rates? The Fed is buying such large amounts of Mortgage Bonds each month to keep home loan rates (which are tied to Mortgage Bonds) near record lows, which they hope will help strengthen our housing market and economy overall. However, as the economy starts to improve and if inflation heats up, Bonds could face some selling pressure...which could impact home loan rates negatively as a result. What is the bottom line? Now remains a great time to consider a home purchase or refinance, as home loan rates remain near historic lows. If you or anyone you know wants to learn more about taking advantage of today's low rates, call or email me anytime. I'm always happy to help. Sincerely, Christian Pak Homeland Financial cpak@homelandmtg.com