Fed Raises Funds Rate a Half Point

Today wrapped up the two-day FOMC meeting and Chairman Powell announced that the funds rate will be increased by a half point. As of today, the federal funds rate is 0.75-1% and is expected to another 2 percent by the end of the year.

From the FOMC statement:

“…the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting.”

The Fed also reiterated their plan to continue weening back supporting lower mortgage interest rates.

Mortgage rates reacted favorably to this news. You can see on the chart that around 11:30 PST, the light blue spikes higher – this is indicating an improvement to mortgage-backed securities (which mortgage interest rates are based on). The reason for the improvement to mortgage rates while the Fed funds rate was moved higher is that this increase to the Fed Funds rate was highly anticipated.

So… what does the 0.500% increase to the Fed Funds rate mean to you?

If you have credit cards or a home equity line of credit or any other debts where the interest rate is based on the prime rate, your rates probably just went up a half point. And they probably will again when the Fed wraps up their June 15th meeting.

Although we had this nice improvement to rates today, mortgage rates are likely to continue to trend higher with the Fed continuing to pull back on their support and let’s not forget inflation, which also drives mortgages higher as bonds (like mortgage-backed securities) react negatively to inflation.

If you have a home equity line of credit or credit card debt, you may want to look at doing a cash-out refinance depending on what your personal scenario is.

If you are considering a home purchase, refinance or second mortgage for a home located anywhere in Washington state, I’m happy to help you! Click here for a no-hassle mortgage rate quote for your personal scenario.

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