YOU Magazine - October 2012 - Ease on Down the RoadWhat QE3 Means for Home Loan Rates
Follow Me On:  
Subscribe to YOU Magazine and other timely market alerts from Brent Prockish.

YOU Magazine
Brent Prockish     Brent Prockish
Brent Prockish Team at Community Mortgage
Phone: (913) 827-9533
Fax: (913) 273-1487
License: 229476
Brent@CommunityMortgageKC.com
www.BrentProckish.com
Brent Prockish Team at Community Mortgage
October 2012



September 2012
August 2012
July 2012
June 2012
May 2012
April 2012


    
Ease on Down the Road
What QE3 Means for Home Loan Rates


Ease on Down the RoadWhat QE3 Means for Home Loan Rates

In September's issue of YOU Magazine, we discussed the possibility that the Federal Reserve would announce further purchases of Mortgage Bonds to keep home loan rates low and help the economy continue to grow. On September 13th, the Federal Reserve announced that it would indeed begin another round of Bond Buying (known as Quantitative Easing or QE3). If you're in the market to purchase or refinance a home, you won't want to miss the latest on this story.

Review: What Is Quantitative Easing?
Quantitative Easing is when the Fed buys Treasuries and Bonds in the hope of achieving:

  • Inflation. To cause a general increase in prices and avoid a deflationary economy.
  • Employment. To encourage business expansion and keep the unemployment rate from getting worse.
  • Higher Stock Prices. Easing makes stock purchases attractive, causing higher demand and a buoyant stock market.

Remember, one of the consequences of Quantitative Easing is that the U.S. Dollar weakens, making U.S. exports more affordable abroad, as well as causing imports to appear relatively more expensive.

This is expected to help large multi-national companies expand and hire–since they presumably have a much larger direct influence on the economy than small businesses–thus stimulating our economy and, hopefully, creating more jobs in the process.

QE3: What Happens Next?
With our economy still struggling (especially our housing and labor markets) and inflation appearing tame, QE3 was widely expected. The surprise was how aggressive it will be.

The Fed announced that over the next several months they will buy an additional $40 Billion of Mortgage Bonds per month, added to the $25 Billion or so they are already purchasing. That's $780 Billion annually. The Fed is buying such large amounts of Mortgage Bonds each month to keep home loan rates (which are tied to Mortgage Bonds) near record lows, which they hope will help strengthen our housing market and economy overall.

The announcement also stated the Fed "expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens."

Meaning QE3 is "open-ended" and the $40 Billion per month will continue until there is a sustainable recovery–as long as inflation doesn't rise too high or quickly. This is an important factor because inflation is the arch enemy of Bonds, as it reduces the value of fixed investments like Bonds. And since home loan rates are tied to Mortgage Bonds, home loan rates worsen when Bonds decrease in value.

If QE3 does lead to inflation, Bonds and home loan rates could suffer as a result. This is one factor in particular to watch closely in the weeks and months ahead. And time will tell if QE3 and this money injection into the economy will spark economic growth and lower unemployment...or if it will devalue the U.S. Dollar, raise commodity and asset prices like Stocks, and heighten inflation fears.

The Bottom Line
Home loan rates remain near historic lows, making now a great time to purchase or refinance a home. If you have any questions about your personal situation, or if you want to see if you can take advantage of today's low rates, contact the professional who supplied you with this month's issue of YOU Magazine.




Community Mortgage, LLC NMLS #224143 3401 College Blvd., Suite 220, Leawood, KS, 66211 (KS Office) 19045 E Valley View Parkway, Suite F, Independence, MO, 64055 (MO Office)

You are receiving a complimentary subscription to YOU Magazine as a result of your ongoing business relationship with Brent Prockish. While beneficial to a wide audience, this information is also commercial in nature and it may contain advertising materials.

INVITE A FRIEND to receive YOU Magazine. Please feel free to invite your friends and colleagues to subscribe.

SUBSCRIBE to YOU Magazine. If you received this message from a friend, you can subscribe online.

UNSUBSCRIBE: If you would like to stop receiving emails from Brent Prockish, you can easily unsubscribe.

Brent Prockish Team at Community Mortgage
3401 College Blvd.
Leawood, KS 66211

Powered by Platinum Marketing

© Copyright 2020. Vantage Production, LLC.