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Will the Latest Fed Meeting Be a Turning Point for Mortgage Rates?

For the fourth week in a row, 30-year fixed mortgage rates stayed in a tight range between 4.50 percent and 4.58 percent. However, the outcome of the Fed meeting concluded on September 18 raises the possibility that those rates might just fall below that range next week.
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CFA, MoneyRates.com

CFA, MoneyRates.com
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For the fourth week in a row, 30-year fixed mortgage rates stayed in a tight range between 4.50 percent and 4.58 percent. However, the outcome of the Fed meeting concluded on September 18 raises the possibility that those rates might just fall below that range next week.

While consumers can easily fine tune the interest rates they put into their mortgage calculators, a difference of 8 basis points or so isn't going to have much of an impact on whether someone can afford a home, or whether it makes sense for them to refinance. However, a new drop in rates, after four months of mostly rising rates, could cause a ripple in the refinancing market, and ultimately even in purchase demand.

What the Fed decided... and why it matters

The Federal Reserve announced that it would continue its program of stimulative measures a while longer. That program consists of keeping the Fed funds rate near zero, and making monthly purchases of mortgage-backed and Treasury securities totaling $85 billion to drive down longer-term interest rates.

It is those securities purchases that helped drive mortgage rates down to record lows. Subsequently, indications that the Fed would taper off those purchases as the economy improved helped precipitate the rise in rates that began in May. Now though, with the economy failing to gain momentum and the Fed deciding to continue its asset purchases, the impetus behind rising rates has been removed.

What consumers should make of this

The Fed's decision raises the possibility that mortgage rates could ease a bit in the weeks ahead, but it doesn't guarantee it. This is where consumers need to seek guidance from both loan calculators and their own best judgment.

If the mortgage calculator numbers indicate that you can afford a house at current rates, or could save money by refinancing as things stand now, you might not want to gamble on the possibility that rates will fall, because the downside is that you could miss your opportunity altogether.

On the other hand, if the numbers on your purchase or refinance calculator don't add up at current rates, you have no choice but to wait -- and the Fed's decision should give you a little more hope that your wait won't be in vain.

"This article originally appeared on Calculators4Mortgages.com: "Will the latest Fed meeting be a turning point for mortgage rates?"

Also on HuffPost:

11 Lies About The Fed
Myth: The Fed actually prints money.(01 of11)
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People commonly say that the Fed itself prints money. It's true that the Fed is in charge of the money supply. But technically, the Treasury Department prints money on the Fed's behalf. Asking the Treasury Department to print cash isn't even necessary for the Fed to buy securities. (credit:AP)
Myth: The Federal Reserve is spending money wastefully.(02 of11)
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Both CNN anchor Erin Burnett and Republican vice presidential nominee Paul Ryan have compared the Federal Reserve's quantitative easing to government spending. But the Federal Reserve actually has created new money by expanding its balance sheet. The Fed earned a $77.4 billion profit last year, most of which it gave to the U.S. government. (credit:Getty)
Myth: The Fed is causing hyperinflation.(03 of11)
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Someconservativeshave claimed that the Federal Reserve is causing hyperinflation. But inflation is actually at historically low levels, and there is no sign that is going to change. Core prices have risen just 1.4 percent over the past year, according to the Labor Department -- below the Federal Reserve's target of 2 percent. (credit:AP)
Myth: The amount of cash available has grown tremendously.(04 of11)
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Some Federal Reserve critics claim that the Fed has devalued the U.S. dollar through a massive expansion of the amount of currency in circulation. But not only is inflation low; currency growth also has not really changed since the Fed started its stimulus measures, as noted by Business Insider's Joe Weisenthal. (credit:AP)
Myth: The gold standard would make prices more stable.(05 of11)
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Rep. Ron Paul (R-Tex.) has claimed that bringing back the gold standard would make prices more stable. But prices actually were much less stable under the gold standard than they are today, as The Atlantic's Matthew O'Brien and Business Insider's Joe Weisenthal have noted. (credit:Getty Images)
Myth: The Fed is causing food and gas prices to rise.(06 of11)
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CNN anchor Erin Burnett claimed in September that the Federal Reserve's stimulus measures have caused food and gas prices to rise. But many economists believe global supply and demand issues are influencing these prices, not Fed policy. And there actually is no correlation between the Fed's stimulus measures and commodity prices, according to some economists Paul Krugman and Dean Baker. (credit:Getty)
Myth: Quantitative easing has not helped job growth.(07 of11)
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Some Federal Reserve critics claim that the Fed's stimulus measures have destroyed jobs. But the Fed's quantitative easing measures actually have saved or created more than 2 million jobs, according to the Fed's economists. In addition, JPMorgan Chase chief economist Michael Feroli told Bloomberg last month that QE3 will provide at least a small benefit to the economy. (credit:AP)
Myth: Tying the U.S. dollar to commodities would solve everything.(08 of11)
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Rep. Paul Ryan (R-Wis.) has proposed tying the value of the U.S. dollar to a basket of commodities, in an aim to promote price stability. But this actually would cause prices to be much less stable and hurt the U.S. economy overall, as The Atlantic's Matthew O'Brien has noted. (credit:AP)
Myth: Ending the Fed would make the financial system more stable.(09 of11)
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Rep. Ron Paul (R-Tex.) claims that ending the Federal Reserve and returning to the gold standard would make the U.S. financial system more stable. But the U.S. economy actually experienced longer and more frequent financial crises and recessions during the 19th century, when the U.S. was using the gold standard and did not have the Fed. (credit:AP)
Myth: The Fed can't do anything else to help job growth.(10 of11)
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Manycommentators have claimed that there simply aren't any tools left in the Fed's toolkit to be able to help job growth. But some economistshave noted that the Fed could target a higher inflation rate to stimulate job growth. The Fed, however, has ruled this option out -- for now. (credit:AP)
Myth: The Fed can't easily unwind all of this stimulus.(11 of11)
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Some commentatorshave claimed that the Fed can't safely unwind its quantitative easing measures. But the Fed's program involves buying some of the most heavily traded and owned securities in the world, Treasury and government-backed mortgage bonds. The Fed will likely have little problem finding buyers for these securities, all of which will eventually expire even if the Fed does nothing. But economists have noted that once the Fed decides it's time to unwind the stimulus, the economy will have improved to such an extent that this won't be an issue. (credit:AP)

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