Interest rates on 15- and 30-year fixed mortgages have reached a 2017 low, but that could change if the Federal Reserve (Fed) continues to tighten the money supply and tackle its $4.5 trillion balance sheet.
In June 2017, the central bank raised its target for the federal funds rate, which is one of the tools the bank uses to conduct monetary policy. Usually the Fed increases the target rate because it expects inflation to increase, and that inflation forecast often translates into higher rates on long-term loans like mortgages.
That said, the Fed’s rate hikes don’t always herald a rise in residential mortgage rates, and the central bank’s actions are not always the best predictor. Case in point: housing economists predicted mortgage rates would climb after two Fed rate hikes in 2017, as they did following the December 2016 rate hike. Instead, mortgage rates remained relatively steady and, in fact, reached a 2017 low of 3.78 % on September 7.
Will mortgage rates go up or down? Fannie Mae, a government-sponsored company that provides finance for almost one-third of the mortgage market, forecasts that mortgage rates will continue to rise slowly over the coming months.
So, what’s next for homebuyers and homeowners? Is it time to think about buying that dream home? Time to lock in that refinance rate? For these and other questions you may have about financing a home, find a Motto Mortgage office near you.