Share this Article

Fed Begins Weaning Market

Written by on Thursday, 19 December 2013 1:36 pm
 PRINT  |   EMAIL

Uncle Sam made two significant announcements this week and both of them will impact housing.

First, the Federal Reserve is slowly reducing the size of its bond-buying program that keeps low-cost stimulus money available to banks. To keep the market stable, the Fed plans to keep short-term borrowing rates near zero until unemployment is well below 6.5 percent.

"Today's policy actions reflect the committee's assessment that the economy is continuing to make progress but that it also has much farther to travel before conditions can be judged normal," said Federal Reserve Chairman Ben Bernanke. "Notably despite significant fiscal headwinds, the economy has been expanding at a moderate pace and we expect that growth will pick up somewhat in the coming quarters helped by highly accommodative monetary policy and waning fiscal drag."

With the stock market at record gains, the consumer wealth affect is helping retail, auto and housing sales. The Fed expects gross economic product to grow by three percent in 2013, comfortably above current inflation rates. Second, the Federal Housing Finance Agency says it will reduce the footprint that mortgage securities buyers Fannie Mae and Freddie Mac play in the mortgage market. The plan is to charge higher fees on loans, as much as two percent of the loan amount, to borrowers without top credit stores or a conforming loan down-payment.

The higher fees don't take place until March, but speculation is that lenders will implement them sooner in order to capture more profit. The fees are substantial enough to raise monthly payments as much as $50 per month for some borrowers.

Currently, more than 95 percent of loans are either purchased or guaranteed by the federal government. The idea behind the Fed tapering is to stimulate the private equity market to compete by encouraging lenders to guarantee their own loans.

To get the best rates, plan to put down 20 percent on your next home and make sure your credit scores are above 760.

Rate this item
(1 Vote)

  About the author, Blanche Evans

Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.
Start Growing Loyal Leads!