This is a big deal for a lot of people. Mortgage loan interest rates are climbing. For some of us, the rising interest rates have been a huge boon. For others, it’s just another expense that adds up. Regardless of what you think about the government’s mortgage interest rates, it’s definitely a trend that we need to be on the lookout for.
The rising mortgage rates are usually for the most part driven by the Federal Reserve. However, you can look at the Federal Reserve as being behind the rise in rates. In fact, in early 2009 Fed Governor Ben Bernanke said that the “stimulus” programs the Fed was making in order to try and boost the economy would only be used as a “temporary band-aid” to keep interest rates low.
In reality, it was the Fed that wasn’t helping the economy at all. At that point, the economy was still in the process of collapsing. The Federal Reserve would only begin to ease up in the fall of 2009. So it’s not surprising to see that mortgages are falling. It’s interesting how the Federal Reserve does little to help the economy. After all, the Fed does a lot to keep interest rates low.
In other news, the Federal Reserve has been doing a lot of little things to help the economy. For example, on the eve of the financial crisis, the Fed kept short-term rates near zero, and then it pushed the unemployment rate up by over 30 points. So to try and help the economy, the Fed has been doing a lot of “little things.
Interest rates are falling. For one, the Federal Reserve has been buying up all the bonds that were supposed to lose value. They’ve also been doing a lot of cutting back on the money supply. After all, inflation is a fact of life.
But that’s not the only thing that the Fed has been doing. The Fed has also been lowering its benchmark interest rate. The Fed has been lowering its rate by 0.25 percent every month since October 2008. The reason? People aren’t saving much. As unemployment keeps climbing, the Fed has been lowering interest rates for all but the very longest-term unemployed.
After a period of nearly constant low interest rates, the Fed decided to lower its rates again. It did so by 0.25 percent, for the first time in eight months. But the reason it was the first time was that the Fed had just cut its monthly benchmark rate by 0.25 percent. This meant that the Fed’s monthly balance sheet was going to shrink by $1 trillion, or more than $500 billion in the first month.
This was a surprising move, for the Fed had been cutting its rates for months without much impact on the balance sheet. The most likely reason for this was that the Fed was not confident that the economy was still growing strong enough to justify the extra drag on the balance sheet.
As it turns out, the Fed also cut its debt-to-income ratio back from 6.5% to 3.8%. That’s a huge difference. It means that the Fed’s balance sheet grew by 500 billion more in the first month, or about $200 billion. This was probably a good thing because it means that the Fed is more confident that the economy is strong enough to pay the extra interest to offset the deficit.
One of the big takeaways from the Fed’s announcement is that the economy is really healthy. That’s one of the reasons that the Fed has to pay interest on the way forward, because the real problem is our government’s budget deficit. That deficit, currently hovering around $3 trillion, is one of the reasons that the Fed took down its outlook on the economy and said that interest rates would start rising.