Bank of America Refinance Mortgage Rates – Fed Pushes Rates Lower
Posted on | September 24, 2009 | No Comments
Bank of America refinance mortgage rates continue lower to 4.91% even though the Federal Reserve Bank reiterated that they are going to stop purchasing US Treasuries by the end of October. The statement alone would have moved mortgage rates higher but the commentary from the Fed that followed this statement is what pushed mortgage interest rates lower. Ben Bernanke and the Fed are extending the mortgage backed securities purchase plan through March of 2010. Initially the plan was to end this program by the end of 2009 but that has been adjusted.
The Fed is going to continue to use the same amount of money, $1.3 trillion, but they are going to stretch this money out for an extra quarter. As long as the Fed keeps sinking money into mortgage backed securities it is likely that mortgage rates are going to continue to stay at low levels. Will those low levels stay at all time lows after the stoppage of US Treasury purchases? That has yet to be seen but my guess is no.
When the Fed stops buying US Treasuries the yields are going to have to increase to make these investment vehicles attractive to foreign investors. Would you invest in United States debt for 10 years at a return of 3.45%? You are probably thinking the same thing that many other investors are; “I can get a better return elsewhere.” Until these yields get to attractive levels we are going to see an increase.
The increase in yields is going to push mortgage rates higher but how much higher? As we saw earlier in 2009, an increase in treasury yields is not going to sent mortgage interest rates through the roof. When the 10 year treasury yield moved from 2% to 4% mortgage rates only went from 4.8% to 5.6%. This may seem like a lot but 5.6% mortgage rates is still historically low.
For those of you thinking about refinancing now is the time to get started. If you continue to wait until after October you might find that mortgage rates are starting to move up. With rates well under 5% currently there is no reason to delay the home refinance process. Take advantage of this opportunity and lock in at one of the lowest mortgage rates in history.
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Author: Alan Lake
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