The mortgage industry has already adjusted for Wednesday’s rate hike from the Federal Reserve. Now lenders are preparing for future rate increases.
Realtor.com chief economist Jonathan Smoke writes about how the Fed’s short-term rate policy impacts mortgage rates. He notes that longer-term rates usually change before the Fed acts.
The Fed is expected to raise short-term rates three times in 2017, by a total of 75 basis points.
Mortgage rates will move higher before the Fed acts again, so if the Fed carries out its three planned hikes in 2017, we could come close to 5% on 30-year conforming rates before the end of next year. … The move toward 5% will not likely be smooth, gradual, or immediate. Instead, rates will likely jump in intervals, based on whatever new positive economic data emerge and also when we see actions from the new Trump administration on fiscal policy.
To purchase a median price home with a 20 percent down payment, buyers with the current 4.2 percent mortgage rate would pay $978 a month for principal and interest. If that rate jumps to 5 percent, buyers would pay $1,074 a month.