Interest Rate Watch!

Posted by Carolyn A. Capalbo on Monday, November 11th, 2013 at 1:15pm.

I am watching the Fed very carefully.  The Fed has been flooding money into the bond market in an effort to keep interest rates very low.  This action by the Fed is called Quantitative Easing.  This is the 3rd time that the Fed has engaged in this aggressive bond purchasing activity, hence why it is called QE3.  The Fed has also hinted that they will be weaning off this program.  What this may mean for you is that interest rates may rise when the Fed stops buying bonds.  I have talked to several lenders and they do anticipate a jump in interest rates, possibly by as much as a full percentage point when the end of QE3 is announced.  I am keeping an eye on this carefully.  Previous bond watchers were calling for a QE3 taper as early as this fiscal quarter; however, with the recent Government shut down and debt ceiling debate, I am hearing hints of 1st Quarter 2014 as the time the Fed will begin their taper of QE3.  This is important for you to be aware of and it may fall inside your desired time lines.  I am also watching how the provisions of Dodd Frank that kick into effect on January 1, 2014 will impact the lending process and availability of mortgage financing.  Most my lending partners are moaning and groaning that qualification requirements will be tightened significantly.  So going forward, anticipate the lending process to require a higher level of scrutiny and documentation.  Bottom line is to watch for the potential for higher rates and tighter lending guidelines come 2014.

Carolyn Capalbo,
Northern Virginia REALTOR®

 

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