The highly anticipated Fed announcement today ended up being good news for borrowers considering refinancing their mortgage or buying a home. The gist of the announcement was that the Fed was going to put a lot more money into compressing interest rates heading into this fall. Here is a quote from the statement:
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
This is the “QE3” that many pundits suspected was coming and it is more aggressive than many assumed. For consumers, mostly this means that mortgage rates could continue to test new all time lows for the next couple of months.
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