Fed Votes to Raise Rates: The Housing Impact?

The Federal Reserve is picking up the pace, voting on Wednesday to raise its key interest rate just three months after its last rate hike. The Fed announced that short-term interest rates will increase by one-quarter of a percentage point and suggested that two similar increases likely will occur later this year. Mortgage rates aren’t directly tied to the Fed’s short-term interest rates but tend to follow them.

As of Tuesday, the 30-year fixed-rate mortgage averaged 4.39 percent, according to Mortgage News Daily. Last summer, rates were near record lows of 3.44 percent.

“Rising inflation will predominantly dictate the next monetary policy decision, but another short-term rate hike should be expected by the end of the summer,” Lawrence Yun, the chief economist of the National Association of REALTORS®, notes at the association’s Economists’ Outlook blog. “Right now, rents and housing costs are increasing faster than other components because of the stubborn housing shortages in much of the U.S. To contain inflation and slow the pace of future rate hikes, more home construction is needed now.”

Source: “How the Fed’s Latest Move Is Expected to Hurt Buyers,” realtor.com® (March 15, 2017) and “Fed Quickens Pace, Raises Rate 3 Months After Last Hike,” RISMedia (March 15, 2017)

30-Year Mortgage Rates Rise to 2-Month High

For the third consecutive week, mortgage rates continue to inch up, with the 30-year fixed-rate mortgage nearing its highest level for 2015 at 3.85 percent this week, Freddie Mac reports in its weekly mortgage market survey.

Freddie reports the following national averages for the week ending May 14:

  • 30-year fixed-rate mortgages: averaged 3.85 percent, with an average 0.6 point, rising from last week’s 3.80 percent average. Last year at this time, 30-year rates averaged 4.20 percent.
  • 15-year fixed-rate mortgages: averaged 3.07 percent, with an average 0.6 point, rising from last week’s 3.02 percent average. A year ago, 15-year rates averaged 3.29 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.89 percent, with an average 0.5 point, dropping from last week’s 2.90 percent average. A year ago, 5-year ARMs averaged 3.01 percent.

Source: Freddie Mac

Home Buying Gets Cheaper This Week

The 30-year fixed-rate mortgage this week dipped to its lowest level in more than a year, bringing borrowing costs down for home buyers and refinancers.

The 30-year fixed-rate mortgage, the most popular loan among home buyers, averaged 3.80 percent this week, meaning that it has remained below 4 percent for every week except for two since Oct. 16, Freddie Mac reports in its weekly mortgage market survey.

Still, “the temporary decline in rates will likely be short-lived,” says Jonathan Smoke, chief economist at realtor.com®. “Those who can take advantage now and lock in a purchase or refinance at these levels may never see these rates again. This is likely the last of the low rates. We’re likely to see increases in the weeks ahead.”

Freddie Mac reports the following national averages for the week ending Dec. 18:

  • 30-year fixed-rate mortgages averaged 3.80 percent, with an average 0.6 point, dropping from last week’s 3.93 percent. The 30-year rate was at its lowest average this week since May 2013. A year ago, 30-year rates averaged 4.47 percent. The 30-year fixed-rate mortgage’s record low was set on Nov. 21, 2012, when it averaged 3.31 percent.
  • 15-year fixed-rate mortgages averaged 3.09 percent, with an average 0.6 point, dropping from last week’s 3.20 percent average. Last year at this time, 15-year rates averaged 3.52 percent.
  • 5-year hybrid adjustable-rate mortgages averaged 2.95 percent, with an average 0.5 point, dropping from last week’s 2.98 percent average. A year ago, 5-year ARMs averaged 3 percent.

Source: Freddie Mac and “Mortgage Rates Hit Lowest Level of the Year Again,” realtor.com® (Dec. 18, 2014)