The Federal Reserve’s Open Market Committee met this week and has expected announced that they were raising interest rates by .25%. That was totally expected and priced into most mortgage companies rates already. Then investors started going through the comments at the end of the meeting.
The Fed announcement also said that it will raise interest rates two more time this year. That came as a surprise to many. But according to The Wall Street Journal earlier this year, 31 percent of investors were operating under the assumption that there would be a fourth increase in 2018. A few also believed that there may be five increases in 2018.
The Fed said that economic activity increased “at a solid rate.” This is a different tone than their May statement, when they called the economic improvement “moderate.” The Fed expects the economy to grow at a pace of 2.8% this year – in March they said it would be a pace of 2.7%. They also expect unemployment to drop to 3.6% by the end of 2018.
The reason for the additional increase in 2018 is due to the inflation rate. The Fed likes to see inflation around 2%. They had expected it to be at 1.9%, now they expect it to be at 2.1% -that is the reason for the 4th rate hike. This could change depending on what the economy does moving forward this year.
What does this mean for those shopping for a mortgage? It’s time to lock in your rates – more than likely rates will continue to increase this year. If you are shopping for a home, you may want to look sooner than later. Remember a .25% increase will not substantially change your payment but if you have been thinking about buying, you may want to start the process now! Rates are still really good – we are just spoiled – I have had that discussion with several people lately – remember rates in the 1980’s – they were in the teen’s!! Like 14, 16 and 18%!! Anything today is great compared to that!!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
