Despite hike, relatively low mortgage rates likely to continue
By Jason Boone
The news was hardly surprising last week when the announcement came that the Federal Open Market Committee would be hiking the target range of the federal funds rate a quarter point.
After seven years of a zero-interest policy, such a move from the Federal Reserve had been rumored for months as the national economy picked up steam. For savers, such a rate hike is welcome news and a sign that the Federal Reserve feels the economy is strong enough to support a hike.
Such a move will be felt here in Bend, Oregon. But not in the ways many might assume.
In fact, a knee-jerk reaction would be to assume that the Fed hike also means an end to relatively inexpensive loans, including historically low mortgage rates. Not so fast.
Maybe surprising to some was the news the day after the Fed hike that mortgage rates actually moved lower. While on the surface seeming paradoxical, it is not. The federal funds rate is certainly influential, but it does not have a direct cause-and-effect relationship with mortgage rates.
The federal funds rate is actually a short-term interest rate on money lent overnight by the Fed to banks. On the other hand, mortgage rates are long-term loans based more on trends in long-term bonds, specifically the 10-year Treasury bond.
In other words, it is no time to panic if you are in the market to buy a new home. Rates, while slowly inching higher, are not likely to make a dramatic jump. (To put current rates into some perspective, the historical average interest rate of 30-year fixed mortgages is around 8 percent. As of last week’s weekly Freddie Mac survey, 30-year rates rested at 3.97 percent.)
Of course, potential borrowers should be careful consumers regardless. Here are some tips:
- Shop around for mortgages, comparing rates in Bend while exploring a range of product offerings. A qualified mortgage broker can be of help.
- Do your research on discount points. In some cases paying an upfront fee can make sense over the long term.
- Explore special program, such as FHA or VA loans.
In the end, finding the right loan can be as important as landing the right home price. And mortgage rates should remain affordable, making now still a good time to buy.
I can help guide you through the process.
To learn more about the Bend market, get started with listing your Bend home, or to view area homes contact me call (541) 383-1426, or visit Bend Property Search to connect with me through my website.