Today the Federal Reserve announced its intentions to keep interest rates low through the year 2013. In an unusally transparent move the Fed notified the markets and citizens to expect low rates for a protracted period of time so that there is more economic certainty in the air. The roller-coaster ride of the last few days and political intransigence in Washington (it takes two parties to tango – but will they??) can potentially cause people to slow economic acitivity. Obviously the Fed was concerned about this possibility, and hence this move.

This was a contentious meeting, with three of the ten Governors of the Fed voting “no” and seven voting “yes” for the specific language of the announcement. But the good news in all of this saw an immediate drop in the benchmark 10 year bond – which mortgages tend to track. The 10 year bond went from around 2.40 all of the way down to 2.18. Wow! Just a month or so ago the 10 year bond was 100 basis points (1%) higher.

This move by the Fed will help more Americans refinance to still lower interest rates and payments and will also help more buyers qualify for home loans. The money saved each month due to refinancings will put large sums of money back into the pockets of our people – and that is a good thing. This money will be either saved, invested, or spent – and all three are good for the economy -the last two being more important at this time as we need to spur economic activity.

So, in conclusion we are definitely back into refinancing territory once again. Hang on to your hat as I am sure there are more exciting days ahead!

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