Fed Rate Hike: What It Means for Mortgage Rates

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But the Fed’s action, and the expectation that it will raise rates again in the coming months, has important implications for mortgage rates, as well as your ability to buy a home or refinance your loan. Rates on 30-year fixed-rate mortgages averaged 3.97% prior to the last Fed rate hike on Dec. 16, 2015, according to Freddie Mac.

 · The Fed hikes, mortgage rates head-fake. Before this third short-term rate hike in just six months, fixed-rate mortgages were barely off 2017 lows.

What happened after the last Fed rate hike. Rates on 30-year fixed-rate mortgages averaged 3.97% prior to the last Fed rate hike on Dec. 16, 2015, according to Freddie Mac.

At 4.38% as of March 2017, according to Bankrate, the rate on a 30-year fixed mortgage has increased by 81 basis point since before the election, in which time the Federal Reserve has raised.

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What the rate hike means for mortgage rates. A flattened yield curve means that short-term bonds pay almost as much interest as long-term ones. Typically, for instance, a 10-year bond will pay an investor a much higher interest rate than a 2-year. As recently as January 2014, the difference in rate, or "spread," between these two bonds was 2.6%. In December, it hit a low of 0.53%.

Mortgage rates today, October 3, 2018, plus lock recommendations Mortgage rates today, March 27, 2018, plus lock recommendations 30-Year Fixed-Rate Mortgages Since 1971 – Freddie Mac Mortgage rates today, January 22, 2019, plus lock recommendations mortgage rates Up, Purchase Applications Down A buy-up is a rebate system where the lender pays a borrower or a mortgage broker for a higher interest rate home.

And with two more Fed rate hikes expected later this year, the rate on the 10-year note could rise over time – and so, by extension, would mortgage rates. It’s just hard to say when.

 · Wednesday’s move by The Fed to hike short-term interest rates by 0.25% doesn’t mean that long-term rates – like mortgage interest rates – will immediately rise. But the run of low mortgage rates will certainly end eventually. Whether it’s sooner or later, there is.

"Fed rate hikes typically mean some increase in interest rates on savings accounts and CDs," says Don Kohn, a former Fed vice chairman and now a senior fellow at the Brookings Institution.

In fact, Fed interest rate hikes impact all revolving loans with variable rates. That means the federal funds rate directly impacts interest rates on credit cards, adjustable-rate mortgages, home equity lines of credit and even certain student loans.