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June 16th, 2017 9:27 AM by Tenby Dahman

What does a Fed Rate hike mean?

There is not a direct relation to mortgage rates from the Federal Funds rate, it’s more indirect; ultimately it’s the market’s reaction to the news and/or any other factors that affect Mortgage Backed Securities economically. In general, weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result.

For the Feds raising rates, typically the markets know that’s coming and hedge the markets reactions by building in slightly higher pricing. So we don’t see much change after the Feds raise rates and we have at times seen them actually go down some. That said, it’s volatile when they do and don’t know what will happen.

Ultimately, it's not worth stressing over, but in general the Fed increases rate b/c the economy is improving and they do it to curb inflation, etc. So, it does indicate that if that continues, the trend for mortgage rates will be up over time too.

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Posted in:Rates and tagged: Rates
Posted by Tenby Dahman on June 16th, 2017 9:27 AM



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