Mortgage rates still low as Fed resists hike
The Federal Reserve met last Wednesday to decide the fate of interest rates and as expected, decided against an increase. Mortgage rates, though slightly higher than the previous week’s annual low, remain historically attractive to homebuyers and those looking to refinance. As of August 21, the average 30-year fixed rate was 3.83%; the 15-year fixed, 3.13%; and the 5/1 ARM, 3.17%.*
There is a plan in place, however, to unwind the economic stimulus, or “quantitative easing” that was necessary after the 2008 financial crisis. The Fed will start selling off the roughly $4.5 billion in Treasuries and mortgage-backed securities it accumulated in order to increase the money supply and lower interest rates after the crash. This move will gradually reverse the process, increasing yields and pulling money back out of the economy.
The Fed also forecast one more rate increase in 2017, though one fewer than its previous two-year projection. As it currently stands, there are three hikes expected for next year and two in 2019. A contributing factor to the less aggressive stance on interest rates is the Fed’s reduced outlook for inflation. The 2% inflation that Chairwoman Yellen and company have designated as their target looks to be elusive for the next two years, as they pulled back expectations for 1.7% in 2017 to 1.5%; and from 2% in 2018 to 1.9%.
With mortgage rates still hovering near yearly lows and six more interest rate hikes expected by the end of 2019, the time couldn’t be better for people thinking about buying a home to take decisive action.
To talk with a seasoned mortgage expert about mortgage rates and more, contact us today at GRArate.com.
*FreddieMac.com, “Compilation of Weekly Survey Data”