Home » Fed Hints at Looming December Rate Hike
Fed Hints at Looming December Rate Hike
- Daily Real Estate News | Thursday, September 21, 2017
- The Federal Reserve voted to leave its short-term rates unchanged on Wednesday but it did indicate that a rise to its short-term interest rates is likely on track for later this year.
- “The basic message here is U.S. economic performance has been good,” Fed Chairwoman Janet Yellen said at a press conference following the Fed’s two-day policy meeting. “The American people should feel the steps we have taken to normalize monetary policy … are well justified given the very substantial progress we’ve seen in the economy.”
- The Fed kept its key rates near zero for seven years. But since 2015, it has gradually raised rates by a quarter of a percentage point four times. Most recently it raised rates in June at a range of between 1 percent and 1.25 percent. Mortgage rates are only loosely tied to the Fed’s short-term rates, but the Fed’s actions do have some influence.
- Mortgage rates, for example, have benefited from the Fed’s purchases of more than $1.7 trillion in mortgage-backed securities and rates have been near their lowest levels of the year, according to the Mortgage Bankers Association.
- The Federal Reserve indicated after its meeting that it will start next month to unwind its purchases of mortgage-backed securities and U.S. government bonds. But any movements likely will be done so at a gradual pace.
- “That means that mortgage rates would rise up only modestly over time,” says Lawrence Yun, the chief economist of the National Association of REALTORS®. “Given the pace of unwinding asset purchases with the fewer rounds of anticipated short-term rate hikes over the next two years, it’s expected that mortgage rates should still remain at historically attractive levels.”
- Yun predicts that the 30-year fixed-rate mortgage may rise to slightly above 4 percent by the end of the year, and may reach just 4.7 percent by the end of 2018.
- Source: “Fed to Start Paring Holdings, Keeps December Rate Rise on the Table,” The Wall Street Journal (Sept. 20, 2017) [Log-in required] and National Association of REALTORS®
