The federal government’s third quantitative easing program, commonly referred to as QE3, was just announced last week by Federal Reserve Chairman Ben Bernanke. The rationale and a in-depth analysis of this policy is best suited for another forum, however, its impact should for those in the real estate market should be low interest rates for quite some time to come. QE3 does differ from both QE1 & QE2 by focusing exclusively on the purchase of mortgage-backed securities (MBS) to the tune of $40 billion a month. With this announcement also came the news that the Fed intends to leave the federal funds rate at near zero until at least 2015. Both of these decisions should help keep interest rates low for mortgages and are taken in an effort to spur economic growth and particularly with the aim of reducing unemployment through this recovery. However, it’s unlikely that rates will drop much further in the immediate future, primarily because banks are understaffed and can’t process more loans anyway. Ultimately though the recent historically low interest rates should stay very attractive, which is extremely positive for the real estate market.
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