Fed Leaves Rates the Same BUT…

The Fed’s announcement today to leave the funds rate unchanged was not a surprise to the markets. What did send the bond market in a tizzy this afternoon was that the Fed ever-so-slightly moved the goal posts out a bit for inflation.

Inflation deteriorates bonds and mortgage rates are based on mortgage backed securities (MBS). The chart to the left shows the movement in mortgage backed securities just TODAY. You can see when the Fed released their statement at 11:00 am PST how bonds dropped and then tried to absorb the data just to plummet at the end of day dropping 84 basis points. When bond prices drop, mortgage rates trend higher.

Mortgage rates have been beyond Goldilocks low… they have been extraordinarily low for a long time. If signs of inflation continue, which includes higher wages (or wage inflation), we will see mortgage rates trend higher.

Bottom line, please don’t delay your refinance and if you’re buying a home, keep in mind that rates going up will mean the same payment will buy you a lesser priced home.

If you are considering buying or refinancing your home, second home or investment property located anywhere in Washington state, I’m happy to help you!

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