What does the Fed want buyers to do? The Federal Reserve kept the Fed Funds Rate low again yesterday in their monthly meeting. This rate is used for banks as a benchmark for their overnight lending to each other, and is a short-term rate.
Mortgage rates track with the bond market, and not the Fed Funds Rate, however, conventional wisdom suggests that the Federal Reserve governors feel that inflation isn’t yet a risk, and that rates should remain low to keep the recovery moving forward.
With rates low for, “an extended period,” there should be no doubt in buyers’ minds that now is a good time to buy. When rates begin to rise, which may be as early as the beginning of next year, they will probably rise rapidly.
Your buying power will be quickly eroded if the rates go up even 1% and they will likely end up quite a bit higher than they are today. I remember buying my first house and assuming a 9% loan – we thought that was great relative to where rates had been!
Get into you lender’s office soon and find out what you could pre-qualify for. You may be surprised, and this is a great opportunity to take advantage of low housing prices.