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Interest Rates To Stay Low For "Extended Period" of Time

Posted on May 02 By Justin McHood

This last week, the Federal Open Market Committee met and announced that they are going to keep the Federal Funds Rate between 0% and 0.25%. There was mixed reaction to the meeting, as mortgage rates drifted slightly higher the rest of the week. According to an analysis at Businessweek:

The FOMC stuck to its target range for the federal funds rate at 0% to 0.25%, and signaled that rates are likely to remain at exceptionally low levels “for an extended period.” This reference stopped short of giving a timeline of 18 to 24 months for the current policy, as anticipated by some market participants.

The Fed also recapped its quantitative easing plans so far: purchase of a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year, and the purchase of up to $300 billion of Treasury securities by autumn. The central bank reiterated its intention to facilitate the extension of credit to households and businesses and support the functioning of financial markets through a range of liquidity programs. Although it held fast on additional moves, the Fed hasn't ruled out additional steps or unwinding of previous measures.

Simply speaking - interest rates are going to be low for the short term. This doesn't mean that mortgage rates are guaranteed to stay low, but with the way that the government is involved with the mortgage market, I think it doesn't sound too far out to say that mortgage rates are likely to remain about the same for the next few months.

But... at some point, they are going to rise, it is only a matter of time.

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