As expected, the Federal Reserve increased their overnight Fed Funds Rate another .25%. This will put the rate in the 2.25-2.5% range. This will affect consumer short term borrowing costs and interest rates on credit cards, and adjustable rate mortgages with an index tied to short term interest rates.
This does not have a direct effect on the 30 year mortgage rate, as it correlates more with longer term rates and mirrors the movements of 10 year notes. I always tell my clients, if they want to know the direction of 30 year mortgage rates, follow the 10 year note (attaching a chart going back one year.).
Using the 10 year note chart as a reference, even though the 10 year note went up substantially over the past year, they’ve backed off quite a bite since they hit the recent highs in November. After the Fed move today, the long rates dropped even more. The 10 year note hit 2.76% today since hitting 3.25% in November. That’s a drop of 1/2% and the lowest mortgage rates since June.
Going forward with the Fed, the projected quantity of rate increases in 2019 was dropped to 2 from the 3 that was conveyed in the last meeting. Fed Chairman Powell indicated that the Fed Rate is at the lower end of what they consider neutral. They’re trying to find that balance of not being as accommodative in the past (rate was at 0% for 7 years!), and being restrictive to the economy. The economic numbers they are using are showing a strong economy, but there are several cross currents where they are not as concrete in 2019 as they were in 2018. Note the Fed predicted 3 rate increases in 2018, but had 4. A lot of the economic growth may have been front loaded, from the sugar high from the Federal Tax change.
Smells to me like a 1 or 2 more Fed Rate hikes, and they’re done for this cycle.
We’ll obviously have to keep an eye on this moving target…
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
Leave a Reply