Fed Maintains Historically Low Rates - Analysts Believe Rates May Rise This Year

March 16th, 2010

Earlier today, Tuesday March 16th, the Federal Reserve announced that they are once again keeping bank rates near zero, continuing the trend of historically low rates. In a press release the Federal Reserve Chairman Ben Bernanke announced that the economic situation is “likely to warrant exceptionally low levels of the federal funds rate for an extended period." Keeping interest rates low is expected to help spur the recovery.

Besides keeping the interest rates low, the Fed has also helped to bolster the economy through programs such as purchasing mortgage-backed securities however most of these programs are at or near their end. Many economists believe that mortgage rates will rise once the Fed is no longer buying mortgages.

Peter Cardillo, chief market economist for Avalon Partners also told CNN.com, "Recent economic data has been ticking higher, with most of the stalls being weather-related. Even the labor market is trending better, and that's the last major indicator that needs to turn to the positive side."

As the economy continues to improve the Fed will need to start increasing interest rates to fight off inflation.
When this occurs, we will likely see an end to the historically low mortgage rates that have benefited people looking to refinance their current mortgages.

Previously, Bernanke estimated that these changes could come as early as this spring. The rates are low right now but no one knows how long it will last. If you have been contemplating buying a new home or refinancing your mortgage, you may want to act now to take advantage of the current historically low rates.

Take Advantage of the Benefits of Refinancing While Rates are Still Low

Refinancing your home with a lower interest rate could save you thousands over the course of your loan. It can also make your monthly payments more manageable by extending your remaining loan term. With interest rates likely to rise in the future, another benefit of refinancing would be to reduce the risk of an adjustable rate mortgage by stabilizing the monthly payments using a fixed-rate mortgage.

First-Time Home Buyer $8,000 Tax Credit Extended to 2010

And if you are a first-time home buyer (have not owned a home for 3 years) you still have time to take advantage of an $8,000 tax credit to buy your home. The tax credit, initially set to expire at the end of November 2009, has been extended to April 30, 2010.

Highlights of First Time Home Buyer Tax Credit:

Additionally, a $6,500 credit has been added for existing homeowners who buy a new residence if they have lived in their current one for at least five consecutive years in the last eight years.

So if you are in the market to refinance or get a new home or equity loan, now may be the time since these record low rates won't last forever.

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