The Federal Reserve increased their target rate for the Fed Funds another .25% today (Sept 26, 2018) to 2.0-2.25%. The gradual increase is expected to continue in the future. Another .25% as soon as this December.
The Fed has direct control of the short term rates. This increase will directly affect the home equity lines, credit card rates, or any other adjustable rate loan that are linked to short term rates.
Attaching a chart of the 10 year note. It’s rate and direction most closely correlates with the 30 year mortgage rates. The 10 year note and mortgages broke out of a tight 2.8-2.9% range a week ago. The 10 year note is now up against resistance at 3.11%. If it goes through that level, we can see fixed rates pushing over the 5.0% conforming fixed rate.
All this is happening while the Fed is liquidating the balance sheet accumulation of mortgage backed securities and bonds, pushing up the long side of the interest rate curve, or specifically mortgage rates.
Fed targets for the Federal Funds rates, which includes another rate hike this year, and 3 more next year:
2018 – 2.38%
2019 – 3.13%
2020 – 3.38%
2021 – 3.28%
Long term 3.0%
Without any disruptions or modifications, we’ll be looking at 6.0%+ Conforming 30 year fixed rates in approx a year and a half. These rates should be considered “normalized”. We are coming off artificially low rates created after the great recession.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me.
Ron Henderson GRI, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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