Black and Buono Blog

By Kiley Black
 
The Federal Reserve is going to pour more cash into the economy in an effort to make interest rates go down and prices go up. They do this by quantitative easing – which to you and me means buying Treasury notes. The Fed pays for billions of dollars' worth of Treasury bonds, which would add billions of dollars to the money supply. In theory, this would cause prices (or inflation) to rise and interest rates to drop, which would include a drop in mortgage rates. The theory here is for businesses and consumers to buy now rather than later.

This may be the perfect time to put your home on the market if you have been thinking of selling. With low mortgage rates, many potential home buyers are looking for that perfect home. By the same token, if you are a renter or home owner who has been thinking of making a change, now may be the best time to buy a new home.

The Fed could begin buying treasuries as soon as early November, after their next scheduled rate policy meeting. Quantitative easing is not a guarantee; however this method of buying treasury bonds would push interest rates down, at least initially.  However, keep in mind that rates will eventually rebound higher. And next week, the Fed is supposed to announce a second round of “quantitative easing”. Mortgage interest rates are low now, but if you have been thinking of buying or selling, you should not wait. We need a crystal ball to see the future, but pretty soon, mortgage rates will have nowhere to go but up.