Fed Interest Rate Increase- What Does it Mean for Mortgage Rates?


This past week, the Federal Reserve raised its benchmark interest rate for the first time since the economic collapse in 2008. The rate has been close to zero since 2008, and has now reached between 0.50%- 0.75%, with goals of being raised three more times in 2017. Although this is a sign of the economy getting stronger, this rise in interest rate can have a direct impact on each of us- from student loans, to credit cards to the cost of housing.

Although the federal reserve does not control mortgage rates, banks typically adjust their rates according to the interest rate trend. It’s no secret that mortgage rates have been at an all-time low for the last couple of years. The national average rate in December 2015 was 3.97% according to Freddie Mac, and this week after the fed announcement, mortgage rates are averaging at 4.18%. In Houston, the average 30-year fixed-rate mortgage remained steady at 4.25%. Because long-term mortgage rates are unchanging, they factor in the anticipation of future rate changes- which explains why mortgage rates have begun to increase in the past few months.

So what does this mean for home buyers?

Yes, mortgage rates may continue to increase over the next year- however, rates are still at a historical low and still offer buyers a good opportunity to buy!