The Return of Low Interest Rates

If you have been paying attention to the financial news since the start of the summer, then you were probably well informed about interest rates and the recent spike they had incurred back in May of this year.  Most experts were convinced that the historically low rates to which we had become accustomed had finally come to an end.  This theory was supported by the presumption that the Federal Reserve would begin tapering their $85B per month purchase program of bonds, one of the reasons that rates were so low.  Before the Fed met back in mid September, rates had climbed almost a full percent from their all time low and were hovering around 4.75% on a 30yr fixed.  The Fed meeting in September to announce the tapering of the purchase program was almost a foregone conclusion and the financial markets had already reacted to this perceived announcement weeks in advance.  However, the announcement never came. Not only did the Fed state that they would not begin to taper, but they left the door open to continue their purchase program for the foreseeable future.

This turn of events allowed rates to fall by about .25% on the same day.  A quarter of a percent drop in one day is pretty significant and it was evident that the financial markets did not see this coming.  Since that time, we have seen rates slowly drop a little more and dip back down to around 4.25% on a 30yr fixed and around 3.5% on a 15yr fixed.  FHA rates have actually dipped to about 3.75% on a 30yr fixed.  These are the lowest rates we have seen since June and they may stick around until the beginning of 2014.

Now that Congress avoided disaster by agreeing to end the shutdown, they still need to continue the debt ceiling debate.  They basically just bought themselves some more time by agreeing to revisit it in February 2014.  If Congress reaches a debt ceiling agreement that lasts at least a year or longer, then the Fed may finally begin to taper its bond purchase program, provided that there is an uptick in employment levels.  And if they do begin to taper as a result of a compromised debt ceiling agreement and an increase in jobs then that would be a positive sign for the economy.

The good news is that rates are unexpectedly low and should remain low for at least the next three months.  They may not be in the upper 3s like they were earlier this year but they are still low enough to spur the housing market.  The question is: is it going to be a 3.875% interest rate or a 4.25% interest rate? Either way, it is still a great rate and should not negatively impact your decision to purchase a home and live the American dream.

To learn more about our company and mortgage products, please feel free to call Dan Longman, President of Priority Lending Corp, at 954-438-3776 ext.11 or email Please visit