Good news from the Federal Reserve triggers stock gains and lower interest rates.

Interest rates in the past few days have dropped nearly half a percent from their 52 week high on the news that the Federal Reserve would continue its stimulus practice of Mortgage rates beginning to drop once again.Quantitative Easing, where $85 billion in government guarantees and buybacks of Mortgage Backed Securities (MBS) has helped to keep mortgage interest rates low in an effort to stimulate the real estate market, as well as the US economy. This has helped interest rates reach historic lows that hovered in the mid 3 percent range earlier this year, before bouncing slightly over a full percentage point late last spring.

In June of this year, Federal Reserve Chairman Ben Bernanke announced plans for a possible slowdown of purchases and guarantees of MBS, which caused a selloff in the stock market, and also triggered a rise in mortgage interest rates. These events took place at the height of one of the hottest real estate seller’s markets in a decade, which had a slight ripple effect over the summer that caused a slowdown of housing sales in some areas as buyers held their breath awaiting the ultimate fate and settling of rates.

Despite the news last spring, Santa Clarita still had a fairly sizable increase in housing prices year over year, and sales over the summer remained brisk. The rise in interest rates did help ease the critical residential resale shortage, placing buyers in better position to negotiate terms for the purchase of property.

Will mortgage interest rates continue to drop?

Rates have seen a slight, but steady drop since the Fed announced their plans to continue Quantitative Easing, and they are down about .10 percent since last Wednesday. Not a huge drop, but significant in the fact that they were steadily rising over the summer. There may still be other factors to consider as the economy continues to improve at a slow pace. Many stockholders are awaiting the next economic and jobs report due at the end of the first week of October.

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