Mortgage Markets Respond to Fed Rate Hike

US-Federal-Reserve

As the Federal Reserve raised interest rate hike last Wednesday, fixed-rate loans on mortgages also increased.  On 30 year loans, rates climbed from 4.21 to 4.0, whereas 15 year loans saw a 3.42 to 3.5 percent increase.

Most experts see the Federal Reserves’s .25% hike (from .75% to 1%) as a prudent maneuver in a strengthening economy.  Jobs numbers in February, for example, far surpassed expectation.  The Fed has indicated future hikes are likely to continue.

This Inman article offers some perspective on the interaction between mortgage rates and Federal Reserve interest rates:

“That Fed move is already built in to rates” for other products (like mortgages), added Barnes — which seems to be the consensus from other experts, too.

The Federal Reserve sets the rate for the overnight exchange of money by banks; governors adjust the rate to help curb inflation or stimulate growth, depending on their assessment of what would be best for the economy.

Although this rate is not the same thing as the mortgage interest rate that buyers pay when they take out on a loan on a home, movement of the Fed rate up or down can put pressure on mortgage interest rates.

“With this increase well anticipated by most markets, Keller Williams does not expect any dramatic change in the current path of mortgage rates. Rates will likely continue to slowly rise this year barring a change in the economic situation,” said Ruben Gonzalez, staff economist, Keller Williams, in a statement.

None of this is cause to panic, as the raise in rates are said to be a result of a stronger economy.  If more people find work and incomes rise, more home ownership should follow. However, if you are currently considering buying, you may want to consult a mortgage expert and get the process rolling to lock in the lowest possible rate.

 

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