It’s been a while since I’ve done a live post. I think today calls for a live post since the FOMC is meeting and it’s highly anticipated they will decide to increase rates. Mortgage rates have been steadily climbing since mid-November following the elections. There are several factors that are influencing the upward move in rates, including what appears to be a better economy along with signs of inflation.
The fed funds rate, which is anticipated to be increased by 0.25% later this morning (11:00 PST), does not directly impact mortgage rates. However, it does influence mortgage rates. As investors are highly anticipating this increase, most of the impact may already be factored into current rates… however, if the FOMC surprises the market, then we may see more reaction with pricing of mortgage rates.
Remember, mortgage rates may change several times throughout the day. Let’s see if the Fed announcement today influences current rates for a 30 year fixed conventional mortgage.
Mortgage rates that I post today are based on a purchase in the greater Seattle – King County area with a sales price of $500,000, 20% down payment and a conventional loan amount of $400,000. Rates quoted below are subject to credit approval. The home buyers have excellent credit with credit scores of 740 or higher and the transaction is closing by January 20, 2017 or before.
As I am writing this post, 9:15 am on December 14, 2016, I’m quoting:
4.125% (apr 4.265%) priced with 0.878 points. Principal and interest payment of $1938.60 does not include property taxes or insurance.
Mortgage rates are subject to change. Click here if I can provide you with a mortgage rate quote for your Washington state home purchase or refinance.
UPDATE 11:13 AM: My pricing is the same as what I quoted pre-fed announcement this morning. It looks like “right now” the pricing has been factored into the mortgage markets.
From the FOMC statement:
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.
11:21 AM PST: The Dow is at 19,903 following the Fed statement, just slightly higher than opening bell.
Although the Fed doesn’t directly control mortgage interest rates, people who have home equity lines of credit (heloc’s) that are not “fixed rates” may see their heloc rate go up. This is because most heloc rates are based on the prime rate and the prime rate follows the fed funds rate. Adjustable rate mortgages may now see higher rates at the scheduled adjustments. It is highly anticipated that the Fed will continue to raise the funds rate in 2017… it could be time to refi your heloc or your adjustable rate mortgage!
UPDATE 4:30 PM: Rates jumped just prior to markets closing today. If you didn’t lock 4.125% earlier today, current pricing has 4.125% a full point higher in fee or you can opt to have a quarter point higher in rate. Here’s what I’m currently quoting (rates subject to change):
4.125% (apr 4.361%) priced with 1.993 points. Principal and interest payment (P&I) of $1938.60 does not include property taxes or insurance. Pricing is just over a full point (1%) HIGHER than what I quoted just after the FOMC rate increase. OR…
4.250% (apr 4.504%) priced with 0.717 points. P&I payment of $1,997.14 does not include property taxes or insurance. So if you did not lock earlier and wanted to opt for roughly the same pricing (points), based on the above scenario, the payment is higher by $58.40 per month.
I think we’ll see mortgage rates continue to trend higher in the new year…especially with the fed continuing to slowly increase the fed funds rate. Historically speaking, mortgage rates are still very low — just not as sexy as they were a few months ago.
NOTE: The photo above is my painting of Janet Yellen on black velvet. You can check out the paintings I do for fun in my spare time at www.rhondaporterart.com