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Time For Fed Action?

Time For Fed Action?
McLean Mortgage


Actions Talk Louder Than Words

2015 has been an exciting time for the markets when meetings of the Federal Reserve Board’s Open Marketing Committee occur. When the markets get excited, stocks, rates and more all seem to get more volatile. The interesting thing about all of this is that the Fed has not done much this year. They have discussed raising rates and said they were going to raise rates, but they haven’t. And that is why we keep saying that the Fed’s words are so important.

As a matter of fact, the release of the minutes of the Fed meetings a few weeks after the meeting are just as entertaining as the meeting itself. For the most part, the markets are expecting no action again this week. There is no meeting in November and that means that if the Fed does not raise rates, they have only one last meeting in December to fulfil their prediction of a rate increase in 2015. However, that prediction does not make an increase a certainty. The Fed’s words always leave them an alternative path.

This is why the economic data released this week and next will be so important even though it comes after the Fed meeting. This week we have readings on new home sales, economic growth for the third quarter and personal income and spending. Next week we have the employment report. This data will carry more weight with regard to the Federal Reserve’s next move than the Fed’s words. After all, aren’t actions supposed to speak louder than words? This data is real economic action.

The Market Update

Rates on home loans eased down in the past week. Freddie Mac announced that for the week ending October 22, 30-year fixed rates fell to 3.79% from 3.82% the week before. The average for 15-year loans decreased as well to 2.98%. Adjustables were higher, with the average for one-year adjustables rising to 2.62% and five-year adjustables up one tick to 2.89%.

A year ago, 30-year fixed rates were at 3.92%, close, but still higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “Following Federal Reserve Governor Daniel Tarullo’s remarks last week Treasury yields dipped. In response, 30-year fixed rates fell 3 basis points this week to 3.79 percent. The housing market continues to benefit from low rates on home loans, with housing starts for September beating expectations and the NAHB’s Housing Market index registering a ten year high in October.”

Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.