The Fed Meeting: What Does it Mean for Mortgage Rates?

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Filed under: Market Comentary

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Yesterday was the second day of the Fed meeting, which means that it was the time when Janet Yellen announced a decision on the Fed Funds Rate. What does that mean for your mortgage?

What is the Fed Meeting?

Janet Yellen is the head of the Fed, and the group meets regularly throughout the year to set fiscal policy for the United States. Generally, they make decisions about whether they are going to increase or decrease interest rates.

When the Fed is meeting, I usually get a bunch of phone calls from clients who are concerned about their mortgage rate. People are wondering if they should lock in their rate before the decision is made.

Yesterday’s Decision

It was announced that rates are going up, and experts are forecasting that there will be one more hike again in the future. It is the third time in six months that the benchmark lending rate has gone up as they are working to shrink the balance sheet for the year. It is also the first time in eight years that it has pushed the Fed rate over 1%.

How do they make this decision? Looking at the economic trends and the rate of inflation helps the Fed to decide whether they should raise the rates. According to Bloomberg, there have been contradictory signals from unemployment and inflation, and these factors influenced the decision to increase rates. The Fed will meet again in six weeks on July 25 and 26.

What Does it Mean for Mortgage Rates?

The quick answer is that the Fed rate doesn’t have any direct relationship to mortgage rates. In fact, if you look at the past few meetings earlier this year, you can see that the Fed has already raised rates this year. During that time, mortgage rates actually decreased.

Mortgage rates operate separately from the Fed rates. Instead, mortgage rates operate on what the general market feels about the Fed rate move. Currently, there is a pretty strong movement in mortgage-backed securities, which is good for interest rates.

Here at Franklin Loan Center, we are working hard to provide the best service for our clients. We are always watching the trends in the mortgage industry, and you are always welcome to contact us if you have questions.

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