The Federal Reserve, as widely expected, increased short-term interest rates by 25 basis points on Wednesday. This marks the fifth increase since December 2015 and third this year. The decision was announced following the Fed's final meeting of the year and the last for outgoing Chair Janet L. Yellen. Officials also announced that they remain on course to hike rates another three times over the next year.
Shortly after the announcement the 10-year Treasury note yield fell as investors fled to the safety of the U.S. bond market. Long term debts like home loans are more closely tied to Treasury notes and mortgage backed securities than they are to the short-term rates affected by the Fed decision this week.
With inflation maintaining its low levels and heavy purchases of Treasury bonds by U.S. and foreign investors, these yields are likely to remain low. If yields continue to drop, it could result in decreases in mortgage rates. Today, conforming no-point 30-year fixed mortgage rates are averaging 4 percent while 15-year rates are near 3.25 percent.
Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.