Federal Reserve Chairman Ben Bernanke made the Fed’s semiannual monetary report to congress on Wednesday. Citing continued high unemployment and the still shaky economy the Fed Chief indicated there are no plans to raise the prime rate in the near future, which means current mortgage rates should remain low.
Bernanke said that “Although the federal funds rate is likely to remain exceptionally low for an extended period, as the expansion matures, the Federal Reserve will at some point need to begin to tighten monetary conditions to prevent the development of inflationary pressures”.
Bernanke further predicted that the economic recovery would be slow, that consumer demand was growing “at a moderate pace” and that the “job market remains quite weak”.
New homes sales fell 11.2% in January, and many analysts are worried about what will happen to the housing market when the government ends the first time home buyer tax credit. Bernanke assured Congress that the Fed will continue to support the housing market by keeping interest rates low and holding onto the $1.25 trillion worth of mortgage backed securities it purchased. This support will likely continue until the economy is more stable or inflation becomes too great.
This is good news for those looking to purchase a new home or refinance their current mortgage. Although the Federal Reserve clearly intends to raise rates in the future, rate hikes do not seem probable until the economy is further along the road to recovery.
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