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What the Fed Interest Rate Hike Means for Mortgage Rates

By: Chris Knight, Great Western Bank Mortgage Manager

June 15, 2017

By: Chris Knight

Over the past 18 months or so, the term ‘Rate Hike’ has become a well-known topic. This has caused speculation, fear and anxiety for some, especially home buyers. It’s important to know when purchasing a home that a rate hike announced by the Fed does not necessarily mean that the interest rate on a mortgage will rise in correlation.

Long term mortgage rates, which may include but are not limited to 30 Year, 20 Year, 15 Year and 10 year fixed rates, are determined by the purchasing of Mortgage Backed Securities sometimes referred to as MBS and not determined or controlled by the Federal Reserve. While the rate moves by the Fed may influence MBS purchasing or selling which can impact mortgage rates, they are not necessarily controlled by Fed moves. In fact, when the Fed announced its 25bps (.25%) rate hike in December of 2015, mortgage rates dropped as much as 50 bps (.50%) shortly after that. The announcement June 14th also had rates moving down slightly and had the 10 year treasury rate hitting its lowest level in 2017.

When it comes to mortgage rates, there are two things that are certain: rates will go up and rates will go down. That is why it’s important for homebuyers to understand the rates and terms options available to them, to evaluate the situation, and make a decision that fits their goals and comfort level.

To learn more or to reach a member of the GWB Mortgage Team, please visit https://www.greatwesternbank.com/personal/loans/mortgage-loans/find-a-mortgage-loan-officer/

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