If you are looking to buy a home or refinance your home in the coming 30-days, you will most likely be hearing a lot noise in the media about the FED and Quantitative Easing; but there is a good chance that you will have no idea what they are talking about (most loan officers cannot explain QE). I am going to do my best to simply define Quantitative Easing for you and explain how it will impact the real estate market in 2011.
So What Is Quantitative Easing?
The term quantitative easing (QE) describes a form of monetary policy used by central banks to increase the supply of money in an economy when the bank interest rate, discount rate and/or interbank interest rate are either at, or close to, zero. The word “quantitative” refers to the idea that a specific quantity of money is being created; “easing” refers to reducing the financial pressure on banks. One of my favorite explanations is that the name comes from the Japanese-language expression for “stimulatory monetary policy”, which uses the term “easing”.
Quantitative Easing is sometimes casually described as “printing money” although in reality the money is simply created by electronically adding a number to an account. Examples of economies where this policy has been used include Japan during the early 2000s and the United States and United Kingdom during the global financial crisis of 2008-2009.
So How Will QE Affect Rates in November 2010?
If you are working with me and my team right now, then you know that the bond and mortgage markets had a nice day today (Thursday, 10/28) after hard selling of mortgage bonds over the past week or so. It is still all about the QE notion coming next Wednesday, about the amount and speed. Too much “easing” is being seen as a negative to the bond market on the idea that too much QE will fuel an increase in inflation expectations and push rates up. Too little easing and too slow a pace is seen as a waste in terms of improving the economic outlook. The Fed is walking the preverbal tight rope; too little will mean nothing, too much may send investors over the edge on inflation fears, and that means an increase in interest rates.
Based on your need to close in the following days, my rate lock advice is as follows:
– 5-7 days: Lock your rate
– 7-15 days: Continue to float (float means to wait and let the market move).
– 15-30 days: Suggest floating
– 30+ days: Float
My immediate rate lock advice: I suggest that in the coming 7+ days, although it is a risk, we may see some improvements in rate.
For more information on having me and my team manage your mortgage or to apply for a mortgage, you may contact me directly at (425) 350-7136 or firstname.lastname@example.org
PLEASE NOTE: The views that I post are only suggestions. Please use my updates at your own risk. Some of the above mentioned advice is taken directly from paid professional advice from David Shirmeyer, expert market analyst.