While rates have crept up slightly in response to the Fed’s hike, the overall effect on the industry won’t be too severe, according to Tom Millon, president and CEO of Capital Market Cooperative, a collective of mortgage lenders.
“Certainly, the 25-basis-point bump was expected,” Millon said. “The pollsters were right for once. The effect on rates, obviously, is not much. Had the unexpected happened, we would have seen a big rate change, but in this case not much happened at all.”
Overall, Millon said, the mortgage industry continues to be robust and healthy.
“Volumes and profits are not where they were post-Brexit or late summer last year, but they’re certainly strong,” he said. “I don’t expect fixed rates to move too far away from 4% anytime soon.”
And while the Fed’s stated goal is to continue with incremental rate hikes, Millon said the industry shouldn’t see any dire consequences from those hikes.
“Fed funds futures show about a 40% chance of the Fed raising another quarter by December,” he said. “We looked as far out as the futures will trade, and they seem to be topping out at about 1.75% by 2020. None of that will affect mortgages that much. It makes us here at CMC pretty bullish about mortgages. This fear of runaway rates doesn’t seem to be in the cards.”
At the same time, rates have crept up enough that the mortgage space is definitely now a purchase market, he said.
“Certainly, the refi-only shops are struggling. I don’t see a lot of refinance volume coming back anytime soon,” Millon said. “The prospect of a really big rate drop is pretty remote. We think it’s going to be a strong purchase market, but we’re not holding our breath looking for refis to come back.”
Fed announces rate hike decision
Rate hikes are ahead – but how many?
As was broadly predicted, the Federal Reserve raised the benchmark interest rate a quarter-point at its meeting earlier this week? But what effect will the rate hike have on the mortgage industry?