Federal Reserve : New Economic Stimulus May Be Warranted

The Federal Reserve released its October Federal Open Market Committee (FOMC) meeting minutes last week, revealing a Fed in disagreement about the future of the U.S. economy and about what, if any, stimulus may be warranted in the next 12 months.

The "Fed Minutes" recaps the conversations and debates that transpire during an FOMC meeting, and is published 3 weeks after the meeting adjourns. 

According to the October minutes, FOMC members "generally agreed" that a housing recovery is under way nationwide, citing increased housing prices, higher sales volume, and rising construction in many parts of the country.

FOMC members made no major policy changes at their last meeting, but agreed that a continuation of additional asset purchases would likely be necessary in 2013, in order to achieve a substantial improvement in the labor market.

Other notes from within the Fed Minutes included:

• On housing: Signs of improvement are "encouraging", and mortgage rates are at historic lows
• On inflation: Essentially "unchanged", notwithstanding recent increases in energy prices
• On Europe: Production indicators signal contraction in business activity and expansion
• On employment: Employment is rising, and unemployment remains high

The economic forecast prepared by the FOMC staff shows an uptick in consumer spending, residential construction, and labor market conditions which more than offset recent downgrades in the business fixed investment and the industrial production outlooks.

Through 2013, economic activity is projected to accelerate gradually, supported by a lessening in fiscal policy restraints. The Fed also anticipates that Atlanta home buyers will benefit from looser credit standards.

Low mortgage rates are helping home buyers, too.

According to Freddie Mac, the average 30-year fixed rate mortgage rate was 3.34% last week, down from 3.55% in September. This has given a boost to buyer purchasing power nationwide and the year-end housing market may reflect it. Demand for homes remains strong.

The next FOMC meeting is scheduled for December 11-12, 2012.

Mortgage Rates Bounce Off All-Time Lows; The Start Of A Trend?

Low mortgage rates are terrific -- if you can get them.

One week after posting its lowest mortgage rate in 50 years, Freddie Mac reports that the 30-year fixed rate mortgage rose by an average of 7 basis points nationwide this week to 4.22%. To get the rate, you'll pay an average of 0.7 "points".

This week's rise in the 30-year fixed rate mortgage pulled rates off their all-time lows so either you locked last week's rock-bottom rates, or you missed it.

Mortgage rates are rising.

As a refinancing homeowner or home buyer in Atlanta , rising mortgage rates are something to watch. This is because, as mortgage rates rise, so do the long-term interest costs of giving a mortgage, increasing your homeownership costs.

For example, if you failed to lock a rate last week when rates were bottomed, and then decided to lock-in only after rates had climbed 0.25 percent, at the new, higher rate, over the life of your loan, you would have responsibility for an extra $5,300 in interest costs for every $100,000 you borrowed.

Rising mortgage rates can be expensive.

For home buyers, rising mortgage rates pose a second problem -- they erode your purchasing power. A home that fits your budget at today's rates may not fit your budget at next week's rates. And because mortgage rates change quickly, you can sometimes feel ilke you're racing the clock.

The hard part about mortgage rates, though, is that we can never know what they'll do next. On some days they rise, on some days they fall, and on some days they stay the same. Instead of trying to "time the bottom", therefore, a good strategy can be to lock the first, low rate that fits your budget. Then, if rates are lower in the future, you can look to refinance at that time.

Mortgage rates remain at historical lows. It's a good time to lock a rate.