The End of Quantitative Easing and What it means for Minnesota Mortgage Rates
Way back when on November 25, 2008, the Fed announced Quantitative Easing, or QE, which meant it was going to purchase up to $600 billion in agency mortgage-backed securities and agency debt. With this action and the ensuing rounds of QE, this stimulus program has driven down interest rates to very low levels.
On November 20, 2008, according to Freddie Mac’s Mortgage Rate Survey, the average rate for a 30 year fixed was 6.04%. One month after QE was announced, that interest rate dropped to 5.19% and eventually drifted down to just above 3.3% for a 30 year fixed mortgage.
So why does this matter for Minnesota home buyers? In the 42 year history of the Freddie Mac Primary Mortgage Market Survey, 30 year fixed rate mortgage rates had NEVER fallen below 5% before the Fed’s announcement of QE. 30 year fixed rates really only settled below 6% for a very short period of time during the history of this same survey, mainly in 2003, 2004 and 2005.
As you may have heard, there has been discussion of the eventual end of QE. So where do you think 30 year fixed rates will go when the Fed officially announces the end of Quantitative Easing? We think rates will go to where they have historically been – at 6.0% or higher.
You can borrow $400,000 at 4.5% for the same payment as $340,000 at 6%. That is 17% more borrowing power. If home prices go up another 5% or 10%, many potential buyers will simply be priced out of the Minnesota housing market.
United Home Loans provides mortgage loans in Wisconsin, Minnesota, Michigan, Indiana and Illinois. Check out our rates below and call us with any mortgage related questions at (708) 531-8388.Minnesota Mortgage Rates
MN 30 Year Fixed mortgage as of July 09, 2013 4.500%/ 4.541 APR
MN 15 Year Fixed mortgage as of July 09, 2013 3.500%/ 3.570 APR
MN 5/1 ARM Fixed mortgage as of July 09, 2013 3.625%/ 3.051 APR
MN 7/1 ARM Fixed mortgage as of July 09, 2013 4.000%/ 3.417 APR
Please click this link
for APR assumptions and more IL mortgage rates