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Fed Raises Interest Rates

  • Jun 13, 2018
Interest Rate

Fed raises interest rates and signals two more increases this year

Now is a great time to lock in your mortgage rate before rates increase again.

As expected, the Federal Reserve raised its benchmark interest rate by 0.25% at its meeting on June 12–13. What does this rate increase mean for homebuyers? Here are some questions and answers:

Q. Why did the Fed raise its benchmark short-term interest rate?

A. The Federal Reserve statement said that “the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly.”

Q. How will the Fed rate hike affect mortgage interest rates?

A. The Fed rate is the short-term rate at which banks lend money to each other overnight. It is not directly tied to long-term mortgage rates, and sometimes mortgage rates go in the opposite direction.

  • Today’s rate hike won’t affect those who currently have a fixed-rate mortgage and those who currently have a rate lock, as long as they take out the mortgage within the rate lock period.
  • Although potential homebuyers may see a rise in mortgage rates in the coming weeks and months, they may also see a decrease in home prices, as some home sellers may drop their prices to attract buyers.

BOTTOM LINE: Now is a great time to lock in a rate for a home purchase or refinance, while rates are still relatively low. 

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