Real Estate Toronto Canada

It’s Fed time again, and as expected, the Fed will keep short term rates at the same 0 –.25% range. The Fed minutes are always much anticipated and analysts try to read between the lines to see if there are any hidden meanings which would telegraph the Fed’s likelihood or timing of their raising rates sometime in the future. You don’t have to be a psychic or Fed expert to read their true meaning now, rates are low and they will stay low for a long time. This version was a little bleaker than previous, versions. High unemployment, lower housing wealth and tight credit are keeping a cap on growth, the statement said, and alluding to the European financial crisis, financial conditions have worsened.

All the Fed watchers are looking for signs of inflation, and the view here is that inflation is in the far distance, and not a threat of any kind, for now. This isn’t great news for the economy, but if you are thinking about purchasing a new home or refinancing your current mortgage, this means that rates for mortgages are likely to remain low. Mortgage rates aren’t directly controlled by the Fed. The Fed sets short term rates for the biggest banks. Mortgage rates are determined by activity in the mortgage backed securities markets, where the bonds trade up and down based largely on the fear of inflation. This news means that with the threat of inflation lessened mortgage bond holders are more likely to accept lower yields. Rates are at record lows now, and there is no guarantee that they will stay this low, but they will stay in a low range, until unemployment starts to drop and the economy improves.

Here is the full statement:

Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad. Bank lending has continued to contract in recent months. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be moderate for a time.

Prices of energy and other commodities have declined somewhat in recent months, and underlying inflation has trended lower. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

Peter Thompson                              630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company