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Ben is at it again. Guns Blazing, Fed announced they are all in for as long it takes. Earlier this morning Fed made the statement that they would buy $40 billion each month of agency mortgage-backed securities on an open end basis. Fed would even extend those purchases and buy additional assets if the job market doesn’t improve. I know you are going like “Shashank – thats too much technical stuff. What does that really mean to me?”. Well one sentence answer – a much better mortgage rate. Lets see how it works.
When Fed commits to buying mortgage backed securities, the investors tend to buy more of those believing their investment is safe and will yield higher returns. And since banks are making more on those securities they can pass on the benefit to the borrowers, thus reducing the mortgage rate. In fact, the yield on Fannie Mae 3% coupon jumped up by 134 bps today. And how much does 134 bps really mean in terms of mortgage rates improvements? In some case it could be .25% reduction in rates. Also, since the Fed mentioned it’s an “open” decision with no end date to this purchase, mortgage rates will continue to remain low for a very long time.
If you are looking for the best mortgage advise and competitive rates for your california home loan – look no further. Call me at 408.615.0655 or email me at [email protected]