Looking Toward 2014: How Will The Fed’s Reduction In Their Bond Buying Program Impact Home Buyers?

Yesterday, Federal Reserve Chairman Ben Bernanke announced the anticipated change to their current bond buying program. The Federal Reserve will begin a tapering process after the New Year, lowering their monthly bond purchases to $75 billion a month. In his final news conference as Chairman, Bernake indicated that bond purchases would be reduced at a measured pace throughout 2014, as long as jobs gains continue as expected.

In addition, Fannie Mae and Freddie Mac have announced that increased lender fees will be debuted in Spring 2014. The increases will be based on the home buyer’s credit score, and may result in up to a 2% increase in lender fees. Those increases will then be passed on to borrowers.

So, what do these announcements mean for you, the real estate consumer? Economists are forecasting interest rates for a 30 year, fixed rate mortgage will surpass 5% during 2014. 1% increase in loan rates reduces a home buyer’s purchasing power by 10%. Please refer to the image below for more information. Small changes do make a big impact on your buying power.
Flyer- Rate and Buying Power

If a home purchase is part of your 2014 financial plan, please consider meeting with a real estate agent to discuss your options. Homeowners contemplating a sale – you may want to look at listing sooner in 2014, before interest rates climb up. Any of the agents at Windermere Real Estate/Mercer Island would love to meet with you and discuss your plans and what options are available for you.

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