Mortgage rates showed some upward movement in advance of the Federal Open Market Committee meeting, despite a great deal of uncertainty as to the outcome. When the Fed tightens policy, it will very likely lift the fed funds range to 0.25 to 0.5 percent, from 0 to 0.25 percent, where it has been since late 2008. But at a news conference, Fed Chair Janet Yellen said a rate hike was still likely this year.
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In the United States , going by historical patterns, stocks, bond yields and the dollar should rise in the aftermath of a rate increase. Even though the economy has recovered the Feds are more concerned there is solid documentation of sustained and measurable growth, particularly the employment and housing sectors.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.
The 15-year fixed-rate average crept up to 3.11 percent with an average 0.6 point. “Consequently, the credit quality of the loan pools backing new RMBS will rise”, Agarwal says.
And Jonathan Smoke, chief economist for Realtor.com, observed that the continuation of historically low rates should further encourage the pursuit of homeownership.
“Prior commentaries about low inflation being transitory were apparently not a motivation for today’s inaction”.
Whether the Federal Reserve raises short-term interest rates today, next month or next year, homebuyers will certainly be affected, in some markets even more than others.
He said in some cases, customers could get rates that were cheaper than the six-month rate for longer terms. Freddie Mac supports communities across the nation by providing mortgage capital to lenders.
“Interestingly, for Americans who are looking to purchase a home this year, mortgage rates are not the primary concern”.
As for savers, it’s tempting to think that any Fed action to increase interest rates would mean a better rate of return for your nest egg at your local bank.
“They’re anxious about whether they’ll continue their lifestyle, whether they’ll be able to leave anything – inheritance – to their kids”, she says.
Finally, consumers may need to rethink their target prices based on what they can afford with higher rates.
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Mortgage rates are not tied directly to the federal funds rate and how they will respond is hard to predict, said Dick Lepre, a senior loan officer with San Francisco’s RPM Mortgage who writes the weekly RateWatch Newsletter. That number basically means that a family earning the median household income could afford to buy 151% of the median-priced homes in the U.S. Yes, the index is down 16% from January when mortgage rates were at their lows for this year.
