“To be quite honest, I believe the market and the lenders already priced the rate hike into mortgage rates prior to the October Fed meeting; rates went up slightly in early August and September,” Steve Sheldon, a partner and senior loan officer with Superior Mortgage Solutions, told Mortgage Professional America.
According to Sheldon, clients have been drawn to the market in anticipation of a potential Fed rate hike and he expects that to continue in the lead-up to the next Fed meeting, when, he believes, the central bank will finally raise its benchmark rate.
“They will raise rates because of money manipulation; we’ve been criticizing China for manipulating money and the US will be doing the same thing if they maintain the rate,” Sheldon said. “There will be global pressure to raise rates.”
That viewpoint, however, isn’t exactly universal.
“If I was to guess, I would say the Fed will maintain its current rate in December; I think there is too much pressure from consumers and politicians to not do anything,” Steven Brand, a mortgage banker with BBMC Mortgage, told Mortgage Professional America. “Some in the industry think they should have raised rates long ago.”
Brand believes a rate hike would provoke a knee-jerk reaction that would cause a flutter in the bond and stock markets. As for mortgage rates, though, he believes a Fed hike would lead rates to trend downward.
Whether or not the Fed does choose to act in December remains to be seen. The central bank did, however, put the move on the table in Wednesday’s announcement.
"In determining whether it will be appropriate to raise the target range at its next meeting, the committee will assess progress - both realized and expected - toward its objectives of maximum employment and 2% inflation," the Fed said at the time.
What effect will a potential rate hike in December have on the mortgage industry? Well, it all depends on who you ask.