This Wednesday, on March 15th, the Federal Reserve Board (‘The Fed’) will meet, and all signs point to them voting in favor of raising the Fed Funds Rate, a key interest rate. What does this mean for you? First, remember that they don’t literally raise mortgage rates but their actions affect the direction of stock and bond markets thus causing mortgage rates to move up or down.
Because they are likely to raise their rate, it signals to the financial markets that the economy is growing and so is inflation, which is a good thing. Of course, too much inflation is not good for the economy and the Fed tries to control the growth of inflation by raising its Fed Funds Rate. I won’t go all ‘economics-nerd’ on you but suffice it to say that the economy is growing and improving, which is causing stocks to go up, and in turn mortgage rates are likely to continue going up as well.
We’re pretty sure the Fed is going to raise rates because they said awhile back that they want to raise rates three times this year and that they would only do it at a Fed meeting with a press conference following it. Well there are only five of those left this year, so if we do the math and they stick to their plan, they will raise rates at three of those five meetings, and the first one is this coming Wednesday. All indicators have been positive so barring any huge surprises, a hike will likely come on Wednesday.
What does all this mean for you? It would take something very compelling to happen – either an incredibly disappointing jobs report last Friday – which didn’t happen – or a major geopolitical drama – to cause mortgage rates to move lower significantly, so if you are looking to buy or refinance within the next month or so, before Wednesday afternoon may be a good time to lock in your loan. Of course, give me a call and we can discuss your specific situation.
If for some reason the Fed decides not to raise rates we could see a nice improvement in rates because their lack of action would signal that the economy is not doing as well as we all think it is, thus causing rates to move lower. But as of now, this looks very unlikely.
So, now you are in the know! Thanks for reading and if you have any questions, or I can help you look at scenarios for your next purchase or refinance just let me know, I’m happy to help!