Real Estate News

Another rate adjustment suspected from Federal Reserve

Published: 07 Jun 2017

Earlier this year, the Federal Reserve raised interest rates after already doing so a few months earlier. There have been hints all along that more rate changes may come before 2018, and June may be the month when the next increase starts. Both The New York Times and Reuters used comments from Federal Reserve Governor, Lael Brainard, as the basis for this prediction.

According to the Times, Brainard only believes that the current month will be the one to see a rate hike, and suggested  that better inflation rates would be needed to justify a further rate jump , which could still be on the way.

Reuters, who called Brainard "influential," quoted her describing the staggered approach to raising securities caps. She specifically mentioned the role federal rates could play.

"Predictability, precision, and clarity of communications all argue in favor of focusing policy on the federal funds rate as the single active tool," Brainard said. "The balance sheet essentially would remain subordinate to the federal funds rate."

It's significant to note that the mere anticipation of what the Reserve will do could be enough to affect mortgages, or possibly put activity into a holding pattern. The Chicago Tribune said that the Fed plans to meet on June 14, and that mortgage rates on the first week of June were "flat" at the moment, although some rates have decidedly moved lower.

While a few may have either stayed the same or declined, in a June 1 statement Freddie Mac said that rates for "5-year Treasury-indexed hybrid adjustable-rate mortgages" have actually increased in both the span of a year and between then and the previous week. In comparison, the 5/1 ARM sat far below both the comparable rates for 15 and 30-year fixed rate mortgages.