Short Term Interest Rates Increased How Does This Effect Your Buying Power

Dated: 12/16/2016

Views: 965

The Federal Reserve hiked short-term interest rates Wednesday, in a move largely predicted by economists. So, what does this mean for mortgage rates and buyers?

First off, the Fed does not set mortgage rates. Short-term rates are different from long-term rates. Mortgage rates typically follow long-term bond rates, such as the 10-year U.S. Treasury note. Longer-term rates typically adjust before the Fed makes a move.

Indeed, mortgage rates have risen near to 60 basis points since the presidential election. More than twice the quarter-point increase that the Fed voted on Wednesday.First off, the Fed does not set mortgage rates. Short-term rates are different from long-term rates. Mortgage rates typically follow long-term bond rates, such as the 10-year U.S. Treasury note. Longer-term rates typically adjust before the Fed makes a move.

The Fed announced that it expects to raise short-term rates three times next year by a total of 75 basis points.

“That means rates like we’ve seen for most of the past five years are indeed history,” writes Jonathan Smoke, realtor.com®’s chief economist, in his latest column. Mortgage rates in the 3 percent range are gone.  

“Mortgage rates will move higher before the Fed acts again, so if the Fed carries out its three planned hikes in 2017, we could come close to 5 percent on 30-year conforming rates before the end of next year,” Smoke notes.

On Wednesday, the average 30-year conforming rate was just under 4.2 percent.

Smoke believes that rates are more likely to move in the month ahead of each key Fed policy meeting. As such, the important meetings to note are in March, June, September, and December 2017.

How big of an impact could rising rates have in the coming months? A median-priced home would be $978 per month payment at Wednesday’s rate of 4.2 percent (and assuming a 20 percent down payment), realtor.com® notes. Take that rate to 5 percent, the monthly payment jumps up to $1,074, nearly $100 more.

“If you intend to buy next year and finance the purchase with a mortgage, acting sooner rather than later will cost you less,” Smoke says is the message to home buyers.


Source: http://realtormag.realtor.org/daily-news/2016/12/15/

Blog author image

Carolann Newton

I was a domestic paralegal for 8 years prior to Real Estate. Since I have been in Real Estate I have grown to love this business, even though it does have it's challenges; it is very exciting. There i....

Latest Blog Posts

New Home In Williamston In Mill Creek Subdivision Is Ready To Move In

123 Crown Court-Williamston 29697Listing price $142,900 with 3 Beds, 2 Baths, 1 Half Baths,This home was built in 2018 and has never been lived in. It is located in quiet Mill Creek

Read More

Great Home In Great Location 29625 And Price Reduced

1227 Phillips Road-Anderson 29625$284,900 with 4 Bedrooms & 3 Baths, 1 Half Baths  *****Price Reduction***** Looking for a move in ready home? This is for you....Just

Read More

DONT LOOK WHERE YOU DONT WANT TO GO

DON’T LOOK WHERE YOU DON’T WANT TO GO Are you familiar with the idea that we tend to attract more of what we focus on? Here’s a great story that perfectly illustrates this concept.

Read More

5 Disasters That Always Leave New Homeowners Clueless

5 Disasters That Always Leave New Homeowners CluelessLike what to do when a tree falls. Read Visit houselogic.com for more articles like this.

Read More