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Home » Business » How long will Mortgage Rates Remain Low?

How long will Mortgage Rates Remain Low?

By Tina Brown on May 30, 2011

Thomas Henig
Digital News Report – Mortgage rates continue to decline, according to data released by Freddie Mac.

“Slower economic activity push(ed) fixed-rate mortgages slightly lower for the sixth consecutive week”, the government sponsored enterprise said in a statement Thursday. “The 30-year averaged 4.60 percent; the 15-year averaged 3.78 percent, marking new lows for 2011”.

The low Federal Funds rate has also placed downward pressure on mortgage rates. But that could change, if the Federal Reserve Bank of Kansas City president Thomas Henig gets his way.

Hoenig told CNN’s Fareed Zakaria this week that the Federal Reserve needs to raise their funds rate. “I’m not advocating for tight monetary policy, but I do think we have to get off of zero if we want to avoid repeating some of the mistakes of the past with a very easy credit environment,” Hoenig said.

Right now the Federal Funds rate is in a range between zero and to 0.25% percent. This low rate, along with quantitative easing, has been the Feds solution to the recession. Other economists worry that these low rates could lead to another financial crisis.

Mr. Hoenig is considered a hawk on the Federal Open Market Committee (FOMC) which determined this country’s central bank rate. The fund rate is a baseline rate that banks use to determine the prime rate and the rate they charge customers.

“We have to think forward from here. And that is, what is the consequence of an extended period of zero interest rates for future years?” Hoenig asked.

By Tina Brown

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