• CMG MORTGAGE, INC. NMLS #1820

Rates on the rise? Not just yet.

  • February 14, 2017

The Federal Open Market Committee (FOMC) closed 2016 with a vote to raise the benchmark interest rate, for the second time in ten years.  The FOMC projected three additional rate hikes in 2017.  As expected, there was no interest rate movement after February’s meeting.  Some economists are questioning if the three rate hike forecast was an overestimate.

Last week, Philadelphia Federal Reserve Bank President Patrick Harker said, “I still am supportive of three rate hikes this year, of course with a major caveat, depending on how the economy evolves and policy, fiscal policy, evolves.”  He went on to suggest the first rate hike could take place as early as March, pending continued job and wage growth.  Harker is one of the ten voters on this year’s rate-setting panel.

CNBC economists suggest that the probability of a March rate hike has dropped from 25% earlier this month to about 18%.  Projections show an approximate 33% chance for a May rate hike and a 69% chance for a June rate hike.  Even if the FOMC holds off on hiking rates during the March meeting, there will still be time to meet the three rate hike projection.

Faster than expected economic growth, as well as stronger job reports could trigger cautionary rate hikes.  Based on the current state of the economy, most market analysts believe the FOMC will not be moving quickly.

Mortgage rates started to increase into the end of 2016 following the November election and December’s interest rate hike.  Since the beginning of 2017, rates have not experienced much volatility, fluctuating as little as a tenth of a percentage point from week to week.  When the FOMC does raise interest rates, mortgage rates are likely to react.  Historically, rates are relatively low and remain so even after the interest rate hike. 

 

Sources: CNBC, Reuters, Bloomberg

Cindy MacDonell
Senior Loan Officer
NMLS # 316198
Branch NMLS # 1270689

Cindy MacDonell

PHONE: (707) 781-8185
cmacdonell@cmgfi.com

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