Thursday, February 1, 2007

Rates Remain Unchanged For The 5th Time

The Federal Open Market Committee, also known as the Fed, decided to maintain the Fed Funds Rate on the meeting which took place Jan. 30-31st. The housing market has shown signs of stabilization and the rate remains the same at 5.25%. The next Fed meeting is scheduled for March 21st.

The decision to keep the rate unchanged comes as no surprise to many, but mixed reports arriving throughout January have raised some doubts among analysts. After several consecutive rate hikes, the rate hasn’t changed since August 2006. Rates are expected to remain stable throughout 2007 and a cut is not improbable later this year.

This news comes together with reports that refinance and purchase mortgage applications have increased during the week ending January 26. The Mortgage Bankers Association has released last week’s Market Composite Index, which compares mortgage loan application activity from week to week. The news causes economists to assume that the housing market has at last reached the bottom and is now beginning to stabilize. The situation is favorable for buyers, as long-term interest rates remain low and sellers decrease prices and offer free improvements in order to get rid of the unsold inventory that’s accumulated lately.

The Fed Funds Rate is the rate at which banks lend to each other and it directly influences credit card interest rates, home equity lines of credit and adjustable-rate mortgages, because their interest rates are often tied to the index itself or its derivatives.

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