Florida Mortgage Rate Forecast – Fed Policy Statement

by Florida's #1 Mortgage Planner on August 10, 2010

Locking Stance:  CAUTIOUSLY FLOATING     Mortgage Bonds:  +22bp

Mortgage backed securities are reacting positively to what the Fed had to say in their Policy Statement.  Let’s take a quick look at what the Fed stated in their Policy Statement that is giving a boost to MBS prices and lowering mortgage rates, possibly setting new record low mortgage rates.

First off, the Fed stated that the economy will grow more modestly than previously expected, with output and employment slowing in recent months.  While household spending is gradually increasing, it remains constrained by high unemployment.  The continued their outlook of tame inflation for some time and the fact they kept their “extended period” wording regarding their rates.  One of the big benefits for MBS prices and mortgage rates was the statement they will keep the Federal Reserve Holdings constant by reinvesting the principal payments form their MBS holdings, as well as rolling over their holdings that mature.  Simply put, they will continue to buy longer-term Treasuries and that is boosting longer-term Treasuries’ prices and spilling over into MBS prices.  Today’s 3-year T-Note Auction was mixed with decent results but a drop in buyside buying.  The results were overshadowed by the Fed, but tomorrow will see the 10-year T-Note Auction.

What does this mean for Florida Mortgage Rates?   Mortgage rates are edging lower after the Fed’s Policy Statement.  The overall outlook remains favorable for steady or lower mortgage rates at this time.

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