The federal Open Market Committee met this week to talk about potential hikes in mortgage rates. This is a rotating, 12 person subcommittee within the Federal Reserve and they meet eight times annually on predetermined schedules, and on an emergency basis when needed. They are loosely known as the keeper of the Feds Fund Rate, a prescribed rate at which banks lend money to each other on an overnight basis.
When the rate is low, the federal reserve is attempting to promote economic growth. It’s one way to manage to foster maximum employment and maintaining stable prices. The Federal Reserve’s zero interest rate policy has created more than 13 million jobs since 2010 however, low rates create wage pressure and promotes risk-taking, both of which can lead to inflation or rising prices.
The bottom line is the Federal Reserve can affect today’s mortgage rates but it cannot set them. After the meeting, it was determined that the Fed will not raise federal funds rates this week. According to a recent article by the Mortgage Reports, “the economy is performing moderately but isn’t runaway, and inflation is under control.”
The Federal Reserve does not rely on the performance of the stock market because the Tao is notoriously wrong about future economic growth and recession. Instead, the Fed group looks at unemployment, employment, and inflation data. This decision will be good for mortgage rate shoppers and refinance borrowers.
Although there is no rate increase as of yet, the group could raise expectations for a June increase.
Why does all this matter? Well, for those looking to buy a home or refinance their current mortgage, it might be wise to lock in one of these rates before any chance of a rate increase. Mortgage rates are down 30 basis points or .30% since December. The mortgage rate market may have risen too far, too fast so were trying to correct the unbalance. We could be seeing some of the lowest interest rates for 2017 right now. Rates that were in the low to mid 3% may be gone for quite some time.
There will be one more meeting tomorrow, Wednesday, May 3, but there is less than a 5% chance of an increase at this point. The next meeting will be June 14 and all economists feel that it will be a large meeting. There will probably be a 70% chance of a rate increase and they may issue their own guidelines for future rate hikes.
Bottom line, if you’re planning to refinance or buy a home, it’s best to do it before June. Contact us today to get started.