Feds Pause Rates, But is it Enough to Save Mortgage?

September 22, 2006 No Comments »

Fed Chairman Ben Bernanke left the federal funds rate unchanged Wednesday, steady at 5.25%. It’s the second month in a row that the fed decided to leaves rates as they are, and many feel this could be the end of interest rates hikes for some time.

As the Fed continues to ease inflation worries and bring the economy back down to earth, they’re hoping the current economic slowdown will be enough to settle nerves and keep rates steady for the months to come.

The Fed warned of possible hikes as inflation risks remained, though many experts feel that the Fed’s next move could be to lower rates.

Of course that wouldn’t happen until next spring at the earliest. The good news is that we are seeing a turnaround in the economy, and a measured one that should keep mortgage rates steady, if not lower and still historically excellent.

However, the question remains whether the recent moves by the Fed will save the floundering mortgage market, and better yet, if anything can save it.

The housing industry is still ice cold, and home sales and values will continue to fall from their now lofty heights.

Mortgage applications continue to decline, and the number of mortgage companies lingering from the mortgage refinance boom have saturated the current market.

Essentially, though mortgage rates are historically low, home loan applications are spread so thin that mortgage companies are finding increased competition and a smaller piece of the overall pie. That makes it tough to do business and more importantly, turn a profit.

It looks like we may get a temporary bump in business, but the overall forecast is grim. Not dead, but grim. The bright side is that if we do see a turnaround in the coming months, the next mortgage boom could come sooner than we think.

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