Fed Action Bodes Well for Mortgage Rates

Filed in Economics, Housing Finance by on March 25, 2019 0 Comments

The Federal Reserve’s decision last week to hold short-term interest rates steady, along with two other key announcements by the central bank, should reduce upward pressure on mortgage interest rates for the foreseeable future.

In signs that the Fed is adopting a more dovish monetary stance, it said that it envisions no rate increases in 2019 and just a single rate hike in 2020.

As NAHB Chief Economist Robert Dietz observed in this Eye on Housing blog post, “this is a remarkable downward revision for the Fed’s outlook, as the December 2018 projections called for the fed funds rate to be roughly 50 basis points higher than the current outlook over the course of 2019 to 2021.”

The second signal was an announcement that the Fed will slow the process of balance sheet reduction or quantitative tightening. The combined announcements mean that the Fed is moving toward a less aggressive stance due to slowing global growth and a somewhat weaker outlook for the U.S. economy.

As we enter the crucial spring home buying season, these actions should bode well for housing demand.

View more analysis from Dietz.

Facebooktwitterlinkedinmail

Tags: , ,

Leave a Reply

Your email address will not be published. Required fields are marked *