The Bottom Line

The Federal Open Market Committee (FOMC) met for a one day meeting this week. The FOMC released their statement on monetary policy, which was  very similar to the FOMC statement released after the January meeting. They reiterated the need for low rates for an "extended time" and that inflation is not a concern today.  There were two changes made that relate to housing. First, the verbiage referring to the MBS Purchase Program, which is scheduled to run out of funding at the end of March, added what may be a door to extend the program in some capacity.  Additionally, the Fed inserted a few words that imply they are concerned about the health of housing, stating: "Housing starts have been flat at depressed levels". This adds some hope that the Fed may need to add funds to the MBS Purchase Program if mortgage rates move higher following their withdrawal at the end of March.

HOW DID MORTGAGE RATES REACT TO THE FOMC STATEMENT???

Rates moved a few basis points lower!

Leading up to and following the release of the statement, both benchmark Treasury yields and MBS prices improved, with much of the gains after the FOMC statement was released. This led to most lenders repricing for the better.  Reports from fellow mortgage professionals indicate lender rate sheets to be better than yesterday.  While the par 30 year conventional mortgage rate does remain in the 4.75% to 5.00% range for well qualified consumers, more lenders are now offering these rates.  To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. 

Today’s Fed Statement has helped lower consumer borrowing costs a few basis points.  While there is room for benchmark Treasury yields to improve further, the same story cannot be told for mortgage rates. Lenders seem to be unwilling to drop mortgage rates below 4.75%. If being quoted these best rates, it may be in your best interest to lock in, especially if you are within 20 days of closing.  If a projected closing date is further down the road, you may want to float to see if the recent rally in rates can extend.

Source: Mortgage News Daily