What the Latest Fed Policy Means for Your Money

Two more years of low rates means savers will continue to be punished.


If you're in a position to refinance, now is a good time. Before the financial crisis, mortgage rates were a lot higher. The last time mortgage rates were above 6 percent—a more normal level historically—was November 2008, according to Bankrate.com. Back then, the average 30-year fixed rate was 6.33 percent. That means a $200,000 loan would have carried a monthly payment of $1,241.86. Today, the average monthly payment for the same loan would be $1,008.62.

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By keeping rates low, the Fed is hoping to spur lending and borrowing to help resuscitate the dismal housing market. The problem, says Keith Gumbinger of HSH.com, is that a quarter of the real estate market is plagued by foreclosures, and the unemployment rate still hovers near 9 percent. Many borrowers simply can't qualify for a mortgage, he says.

While short-term interest rates are expected to remain low, mortgage rates won't necessarily stay near record lows, says Gumbinger. "The Fed doesn't specifically dictate what happens to mortgage rates," he says. "While they influence, certainly, where rates are in terms of monetary policy, if inflation or [economic] growth does begin to creep up, you'll see mortgage rates or other long-term interest rates begin to rise somewhat."

Twitter: @benbaden