First Hint of Higher Mortgage Rates Rumbles Through Markets Today as The Fed Discusses Ending QE3 Early
Posted by Mike Askins on Thursday, January 3rd, 2013 at 2:40pm.Real Estate activity has been brisk on a sustained basis for the first time since the sharp recession of 2008/2009, and as a result the Federal Reserve in an emerging policy shift, has spoke to the possibility of ending their QE3 program sometime in late 2013. The Fed's asset buyback program currently purchases 85 Billion per month of mortgage backed securities. The current buyback action by the Fed is the reason behind the multi-generational low interest rates currently enjoyed within the U.S. Although QE3 is not ending anytime soon, the talk of ending this recession era emergency program, is now in the political discussions and may continue to bias mortage rates higher through 2013.
Mortgage rates have ticked up today as a result of today's news. However, with the looming Federal debt ceiling discussions still pending, rates should continue to be range bound, but it seems that the first shots signaling a changing economy have been fired.
REAL TIME MORTGAGE INTEREST RATES
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HOW MORTAGE RATES AFFECT YOUR PURCHASING POWER
When rates go up 1% it is like adding $30K to your home's price tag. When rates go down by 1% it makes the price of the home you want to buy feel $30K less expensive. Said another way IF at 6% you can afford to buy a $300K home, then at 5% you would be able to afford a $330K home while maintaining the same payment resulting from a 6% loan on a $300K home. On the other hand, if rates go up 1% then instead of being able to buy a $300K home you would have to lower your price to $270K to keep your monthly payments the same.
- Bottom line, RATES can cause a large change in your house payment.
Sources: Bloomberg / Bloomberg - Stocks Sell Off After FED Hints of Ending QE3
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