Seems like all we are talking about lately are mortgage rates – and they are on the increase again. The Federal Reserve met this week and as expected raised interest rates .25%. This was expected and many expected rates to stay steady and maybe even improve after this week's meeting. However, there were some surprises in the meeting.
Sometimes it's not the amount of the increase or decrease in the rate, but the wording that the Fed gives in their reports. This one had more information about future increases and the amount of increases that lead mortgage traders to sell bonds quickly, which in turn increased interest rates. There were some investors that raised rates more than once after the report came out on Wednesday.
In the Fed's report, they said that the economy is expanding at a "moderate pace", with solid job gains since the beginning of the year. Inflation is expected to rise over the "medium term". They also anticipate more frequent rate hikes in 2017. That was part of the statement that sent rates up this week. Monetary policy can take a long time to work through the economy. The rate hike in December 2015 was just starting to be felt by the market recently. They are working in the future.
The Federal Reserve has been re-investing in mortgage bonds and will continue this. This does help keep rates lower than they could be. The Fed plans to continue this until the normalization of the Federal Funds Rate is well under way.
Many lenders are currently offering FHA and VA rates in the high 3's to 4% range, conventional rates are slightly higher. These rates remain about half of the historical average of 8%. So rates are still very good – but on an upward swing.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, AnEqual Housing Lender, NMLS#150953 - Email - Website
