The Federal Reserve Increased Rates. Now What?

Fed IncreaseUPDATE 1/28 FED DECISION: Rates left unchanged. The Fed stated that they no longer view risk as balanced and expectations that inflation will rise have been decreased. Future rate hikes to be a slow and steady pace. This is all general good for mortgage rates to remain low until hopefully March!!

Orignal Post: The Federal Reserve increased rates at their last meeting but what exactly does this mean for mortgage rates and homeowners? According to Peter Green, Branch Manager, Atlantic Bay Mortgage Group, the real question is,

“Does the Federal Reserve literally change mortgage rates when they perform a ‘rate increase’?” The good news is… no they do not.

When the Federal Reserve changes rates it has an impact on our stock markets. What is very important is what the Federal Reserve says (their commentary) at the time of their meeting which helps us understand their bias for their financial policy and therefore mortgage rates. At the last meeting they made it clear that the trajectory would be 4 rate hikes in 2016. Since then we have had numerous economic releases that very well may change that bias. Inflation for instance is now suddenly stabilized which favors mortgage rates. Another thing to listen for is China and Oil pricing (oil prices help gauge inflation). The Fed has commented on their concern over China so it could impact their path. Economic news such as these as well as others that have proved helpful to mortgage rates could possibly change their trajectory.

So back to our question; what does this all mean for mortgage rates and homeowners? As I write this (1/25/16) all fixed rates are at their lowest in months even though the Fed increased rates for the first time in almost a decade. What is really interesting is that the Fed meets again this coming Wednesday the 27th. Be watchful of this meeting as it could very well set the trajectory of mortgage rates for several weeks at least. If economic indicators continue to favor mortgage rates and the Fed changes their bias of 4 rate hikes in 2016 then rates could drop suddenly again. There is of course no way to predict what they will do so we will have to see what Wednesday brings.

All in all the mortgage rate environment proves very favorable for homebuyers and those who never took the opportunity to refinance.

Peter Green, Branch Manager, Atlantic Bay Mortgage Group can be reached at is office at 302-227-4747 or via cell phone at  302-462-0366

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