Enjoy Lower Rates While You Can

The party may not last long. The Fed meets again at the end of October, and the committee could vote to reduce the pace of bond purchases, as James Bullard, president of the Federal Reserve Bank of St. Louis, reminded investors this week.

The Fed has been spending $85 billion per month in these purchases to stimulate the economy and keep rates low. Once the Fed pulls back on the program, mortgage rates may shoot up.

Unless economic data show significant improvement in the economy before the next Fed meeting, it’s unlikely the Fed will take action. But if you are a borrower, don’t bet your money on that, says John Stearns, a mortgage banker at American Fidelity Mortgage Services in Mequon, Wis.

“I don’t expect tapering in the next meeting, but you never know what’s going to happen,” he says. “If you are able to lock now, do it. Don’t look a gift horse in the mouth. You saw how fast rates changed back in May.”