As expected, and going against the wishes of some, the Fed increased policy rates by a quarter percent at their December meeting. This is the fourth hike this year and the ninth since 2015. Previously, the benchmark rate was kept at a record low for seven years.
What does an increase mean?
• It could cause banks to increase their “prime rates,” which are often used to calculate interest on consumer products like credit cards, private student loans, and home equity lines of credit (HELOCs). Adjustable Rate Mortgages (ARMs) may be directly impacted as well.
• Fixed mortgages are typically based on long-term rates, which are not directly affected by Fed rate changes. However, Fed policy does influence mortgage rates, which can rise in anticipation of future Fed action. There are exceptions, yet home loan rates will typically follow overall interest rate trends over time.
Here’s something new:
Officials initially projected three additional Fed rate hikes for 2019, but that number dropped to two. Fed members say they will continue monitoring economic data to make future decisions.
In this volatile economic season, please reach out to us to discuss how all of this might affect your real estate decisions.
NOTE: this article was graciously shared by Mark Ferguson, Senior Loan Officer, MVB Mortgage.