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Mortgage rates fall following Fed rate hike

Posted by The Aramco Group on Thu, Mar 16, 2017 @ 14:03 PM

As expected, the Federal Reserve announced this week that it will raise short-term interest rates for the first time since late last year by a quarter percentage point. This increase marks the third time the Fed has made such a move since December 2015.

While the central bank does not directly set mortgage rates, its actions can affect the housing market. Rather, mortgage rates tend to move with the 10-year Treasury note, which serves as a gauge for many forms of credit, including home loans. The Fed's decision led to the biggest rally in bonds since June as officials also announced that there are no plans to raise rates more than three times this year.

Mortgage rates are still historically low and while they may creep up later in the year, experts predict they will remain well below 5 percent throughout 2017. The cost of borrowing began a climb last fall. Today, conforming no-point 30-year fixed mortgage rates are averaging 4.125 percent while 15-year rates are near 3.25 percent. A year ago those rates were 3.625 and three 3 percent, respectively.

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