Mortgage rates decrease following the announcement of the Fed rate increase
The financial market had their hand on the pulse of the Federal Reserve last week. Financial markets were giving the odds of a March rate hike as 80%. That led mortgage interest rates to increase earlier this week in anticipation of Janet Yellen’s announcement Wednesday.
As predicted, the Federal Reserve announced Wednesday that it would raise interest rates by a quarter of a percent.
“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 3/4 to 1 percent,” the Federal Open Market Committee said in a statement. “The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.”
In the wake of the announcement, mortgage interest rates dropped. To monitor general rate trends, we track the average 30-year fixed mortgage rate from Mortgage News Daily.
The MND average rate ran up to 4.39%, then dropped to 4.27% (down 0.12) following the Fed announcement.
The Fed rate hike marks only the third time in a decade the Fed has raised its benchmark interest rate. The last hike came in December.
The hike came as no surprise because the economic news has continued to be relatively good, Bankrate’s Greg McBride recently said in an interview with KTSA News.
That positive news is echoed in the residential housing market. Mortgage Professional America reports builders confidence in single-family homes market at 12-year high. Buyers continue to purchase new homes, as the proportion of new mortgage originations that were for home purchases increased to 57 percent in February from 53 percent a month earlier.