The Fed has finally hiked rates. What’s next for the mortgage market?

by Ryan Smith15 Dec 2016
The Federal Reserve raised interest rates for the first time in a year yesterday – a move that may raise mortgage rates. But the head of a large lending company is counseling calm.

“The Fed’s decision to increase its key interest rate shouldn’t be a major cause for alarm with consumers,” Doug Lebda, founder and CEO of LendingTree, said in a statement emailed to MPA. “Mortgage rates offered to borrowers on our network have been increasing over the past few months, from an average of 3.6% for a 30-year fixed-rate loan in August to 4.3% as of today, which is a difference of roughly $90 a month.”

The good news, Lebda said, is that lenders have been anticipating the Fed’s decision for a long time. Indeed, most observers were fairly certain that a rate increase was coming, with a recent Reuters poll of 120 economists finding that all of them expected a rate hike.

That means, Lebda said, that lenders “have baked the likelihood of a rate hike into their loan pricing, meaning that mortgage rates are unlikely to change dramatically from where they are today.”

And a rate increase signals the Fed’s confidence in the economy.

“The good news for housing is that if interest rates are rising because of an improving American economy, consumers are seeing higher incomes, greater job opportunities and better returns on their savings, all of which will work to help counteract rate increases,” Lebda said. “With that said, consumers should still revisit their loans and evaluate their opinions while rates are still relatively low.”
 

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COMMENTS

  • by NoSpin JustFacts | 12/15/2016 12:21:01 PM

    What data is author pulling from that validate prevalent rising incomes to maintain affordability with raising home prices and rising rates?

  • by commonsense | 12/15/2016 1:53:59 PM

    Take a look at history as your guide. In early inflationary stages and rate increases, home prices follow suit and rise along with rates. Rising rates are occurring based on economic growth, not Fed double-speak. There's a long way to go before rates rise to the point where it will hinder prices, and this is still very early in the cycle.

    Many have amnesia and cannot recall that even 10-15 years ago we had rates from 6-8% which were considered normal. Not a chance this .5% rise will stifle prices, and ultimately will result in higher prices as fence-sitters realize the super low rates are history.

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