What Does The Fed Bump Mean To You And Mortgage Rates

What Does The Fed Bump Mean To You And Mortgage Rates

On Wednesday, December 13th, outgoing Chairperson of the Federal Reserve Board, Janet Yellen, did what the market expected The Fed to do, and bumped short term rates (Federal Funds Rate) by 1/4% or .25%. 
This interest rate bump was expected and there were no surprises in the commentary from the Fed.  No surprises means, Wall Street and the market was not caught off guard, all good and life goes on today with little changes in the lives of most people.  

The Fed Funds Rate is the short term rate that the Fed charges to lends to money to banks  and banks lend to other money centers on a very short term basis, often just a day or two.  The Fed really has little control over long term rates, like mortgage rates.  Mortgage rates are more dictated by the market as a whole.   

What will happen is this... every bank across the US will raise their "Prime Rate" to 4.25% today.  This will impact any home owner that has a Home Equity Line of Credit.  (HELOC).  Most HELOCs have an adjustable rate that is tied to the movement of The Prime Rate.  

The Fed also noted, as expected, they project three more bumps in 2018 and again in 2019, giving us a picture of where they see the economy going.  This tells us, they see productivity picking up and unemployment going down and want to keep inflation within their target range of at/under 2% on an annualized basis.  All good for the markets and economy as a whole and the Housing Market.   Mortgage rates actually improved slightly with the news and announcement on Wednesday.  

While we can see mortgage rates drifting slightly to the higher side in 2018, the Fed Bump in and of itself, did not push mortgage rates higher yesterday, so home current home buyers can relax for the short term.   Recommendation for home buyers... home prices will continue to climb and mortgage rates may trend to the higher side, making "waiting to buy", potentially more expensive later down the road.  If you can buy today or list/sell and buy sooner rather than later... this is potentially less expensive.  The "waiting game" is almost always more expensive.  

Here is a short video clip with more information:  
Blog post courtesy of Ken Pederson and FAIRWAY Independent Mortgage Corp.  NMLS: 134943

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Dated: December 14th 2017
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