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Tuesday, September 29, 2009

Real Estate Loans: The Fed

Dean C. Piller by GRI Instructor Dean C. Piller
Teaches GRI Course 109 - Residential Real Estate Finance, West Los Angeles College Instructor, Mortgage Broker
View future classes taught by Dean C. Piller

The Fed, also known as the Federal Open Market Committee (FOMC) wrapped up its monetary policy meeting Wednesday, keeping, as anticipated, the federal funds rate at a 0 to 0.25% target range as inflation risk remains subdued.

The FOMC indicated positive developments since its August meeting, although it plans to extend certain securities- and debt-purchasing programs into 2010.

"Conditions in financial markets have improved further [since August], and activity in the housing sector has increased," FOMC members wrote. "Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit."

What does this mean? In a nutshell, even though the economy is showing signs of recovery from the recession, interest rates have remained low, and in fact, have gone down over that last few days. When inflation is in check, rates go down. When inflation rears its ugly head, which we expect to have at some point, rates are going to take off.

We advise that if you or your clients are thinking about refinancing or purchasing, this would be a good time to get off the fence. Interest rates are in the mid to high 4's for a 30 year fixed loan. What are you waiting for?

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