The Federal Reserve met this week and did not raise interest rates. Jobs remain strong, but the pace of growth has slowed slightly.
What does this mean for the homebuyer? Hopefully it will keep mortgage rates slightly lower than originally expected for 2019. The rates that the Fed set are not mortgage rates but are short term rates. They will affect home equity rates and credit card rates, but not directly affect mortgage rates. What we do see is reactions to the news and that can affect mortgage rates. When the Fed made their announcement, the stock market rose – that can be bad for mortgage rates. The price of oil increased – also bad for mortgage rates and treasury yields increased – also bad for rates. These are all short term effects but they do play into the mortgage interest rates.
The Fed is watching inflation – as long as it stays where they want it, they will be less likely to raise rates. The concern is a recession but at this point, the board is not worried about it. There were a couple members that mentioned the economy slowing but not enough to worry about now. They also didn’t mention the government shut down. They will watch to see if this affected the economy moving forward. The Fed is watching labor market conditions, indicators of inflation and readings on financial and international developments.
So what is going to happen in 2019? Best guesses at this point are small increases by the Fed and they will probably give us some notice in their speeches. There are many other factors that affect mortgage rates – the stock market is a big one. Also anything going on in the economy – so if there are issues that concern investors, they may take money out of the stock market and put it in bonds – if so, that can help keep rates low and maybe help rates drop. No guarantee on that happening! If the stock market is rising, typically we see mortgage rates increase also. From what we are seeing and hearing, it looks like rates will slowly increase, but not as much as originally expected.
Mortgage rates are still low – it’s a great time to buy a home! Let us know if we can help you!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
