New York – The mortgage giant, Freddie Mac (NYSE: FMCC) has increased the average rate on 30-year fixed rate mortgages from 3.90 to 3.91 percent, being its second week increase in a row.
Now that the job market is significantly recovered from the Great Recession, experts believe it is time to move towards normal rates, especially considering the Fed has kept its key short-term rate at a record low near zero since the financial crisis struck seven years ago.
Now, after months of speculation Fed’s policymakers may finally raise key interest rates on Thursday. A rate hike by the Fed could bring higher rates for home loans. Meanwhile, the rate on 15-year fixed rate mortgages rose to 3.11 percent from 3.10 percent.
“The Treasury market was relatively quiet this week, and as a result, the 30-year mortgage rate barely budged […] Low mortgage rates help to support housing markets, which continue to bring good news. The National Association of Home Builders’ HMI came in above expectations at 62, which is a 10-year high” said Sean Becketti, chief economist at Freddie Mac, as reported by the Washington Post.
Experts insist that even if the Fed decide to raise short-term interest rates, the housing market should not expect a significant impact.
“We’re still on track for the best year of home sales since 2007. And in contrast to two years ago, when mortgage rates spiked in response to the Taper Talk, the economy is in much better shape and markets have been expecting the Fed to act for months. While our outlook incorporates a moderate increase in mortgage rates over the next 18 months, rates are likely to remain low by historical standards and should not be a determining factor for most Americans looking to purchase a home” continued Becketti.
A rise in the Federal Funds Rate would not necessarily lead to an increase in mortgage rates as home loan rates are influenced by several factors. Many experts, like Becketti, still argue that factors like a sharply slowing China, the tumult in markets and persistently less-than-optimal inflation, raise serious concerns.
Source: Freddie Mac