Mortgage Interest Rates

If you’re in the market to buy a home, purchasing while inflation is low is a smart move. It’s not the only thing that factors into mortgage rates, but it’s certainly among the biggest contributors. (Photo: Pixabay)

Michaela Phillips, Guaranteed Rate, Inc.

Michaela Phillips,
Guaranteed Rate, Inc.

In news from the financial world, it’s expected that the US Federal Reserve’s Open Market Committee will raise interest rates before the end of the year. Experts are predicting a 60% chance of an increase. This is exceeding expectations; just recently, experts set the odds of an increase at around 25%.

Worth noting is that – in 2015 and 2016 – the Fed did increase interest rates as the years drew to a close. But, what does this mean for mortgage rates?

Many people assume that the Fed controls mortgage rates: they don’t – Wall Street sets that tone. However, the Feds do wield influence. Once they meet to discuss interest rates, they issue a press release discussing the economic forecast. This is issued to the public, available to bankers, home owners, and everyone else.

When this press release discusses the economy in positive terms, mortgage rates tend to rise. When it discusses a more negative view, mortgage rates tend to decrease. When the press release is a mix of both positive and negative (as they have been most recently), mortgage rates can go either way. They can also remain relatively stable.

In present day, the economy is thriving but there are obstacles to long-term growth. Inflation rates, for instance, remain low, something that’s not conducive to economic prosperity.

This mixed message leaves mortgages variable and makes locking in a good rate even more important.

Of course, home buyers can also benefit from listening to what the Fed is saying. Inflation, as mentioned above, is something upon which the Fed often focuses. This is important because there is a direct link between inflation and mortgage rates: when inflation increases, mortgage rates do, as well.

Wall Street knows this and pays attention to what the Fed says, particularly as the findings relate to inflation. In today’s market, inflation is falling below the Fed’s target rate (which is 2 percent each year). This is good for home buyers, but it’s also something that may not last. As the name implies, inflation is designed to increase.

If you’re in the market to buy a home, purchasing while inflation is low is a smart move. It’s not the only thing that factors into mortgage rates, but it’s certainly among the biggest contributors.

By Michaela Phillips, Guaranteed Rate Inc. Michaela is the Vice President of Mortgage Lending at Guaranteed Rate, Inc. Contact Michaela at 303.579.5517, e-mail michaela@michaelaphillips.com or visit michaelaphillips.com. NMLS:312874.