Fed Leaves Short-Term Interest Rates Unchanged Again
Mortgage News from Quicken Loans
The Federal Open Market Committee announced this afternoon that it will hold the Fed Funds rate (the overnight rate at which banks lend to each other) at 5.25% for the third consecutive meeting. This news has a direct impact on consumers with adjustable rate mortgages, home equity lines of credit and credit cards, as the Fed Funds Rate is a key driver of short-term interest rates.
"With the third consecutive pause by the Fed, the markets got exactly what they were expecting today, based on the most recent inflation gauges. Finding the right balance between encouraging growth and controlling inflation continues to drive Fed policy, though. We've seen some price moderation of late, particularly with energy costs becoming more favorable to the consumer, but another important indicator of the Fed's success will be the GDP numbers for the third quarter this Friday," says Bob Walters, chief economist of Quicken Loans.
"After 17-straight short-term interest rate hikes starting in June 2004, the Fed's decision to pause and then take no action over the last three meetings has brought a collective sigh of relief for homeowners with adjustable rate mortgages and home equity lines of credit. They know that at least in the interim their payment will not change," says Walters. "However, with long-term interest rates having recently come back down to the lows for the year, homeowners have increasingly been using that opportunity to refinance their mortgage into a fixed-rate program and lock in payment security for the foreseeable future."
This article is reprinted by permission from Quicken Loans © 2006 Quicken Loans Inc. All rights reserved.
