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Signaling Confidence, Fed Holds Rates Steady

In an announcement that should bolster the housing industry, the Federal Reserve said Wednesday that it intended to keep key lending rates near zero “for an extended period” and continue to buy mortgage-backed securities and debt through March 2010.

That’s the second time the Fed has decided to stretch out its program to encourage spending and stimulate the economy.

Economists predict that the Fed will keep the key lending rate near zero into the first quarter of next year. Holding that rate low means that consumer loans, including mortgages, home-equity loans, and credit-card rates, remain at the lowest point in decades.

Greg McBride, senior financial analyst at Bankrate.com, warned that these low rates will eventually head higher and said home owners interested in refinancing should realize that “it could be a different story 12 months from now,” with much higher rates for 30-year fixed-rate mortgages.

Source: The Associated Press, Jeannine Aversa (09/23/2009)

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