Real Estate News

Mortgage rates decline despite Fed increase

Published: 28 Apr 2017

Earlier this year, the Federal Reserve made good on its plans to raise the rate for short-term interest. It was one of a series of similar hikes which could happen as soon as this year, but despite this, there seems to have been a decline in mortgage rates.

For potential new home buyers, eager to enter the market, this could be a positive sign, though only if it doesn't mean a lack of stability for the future market. This is especially true since the main measure to descend this low is the rate for 30-year fixed mortgages.

Freddie Mac proclaimed this news, with the average rate for that class of mortgage at 3.97 percent. Other categories were even lower: 15-year fixed-rate mortgages were at just 3.23 percent, while 5/1 ARMs were even lower. 

There seems to be some mixed feelings over whether or not the proposed future Federal Reserve hikes will actually even happen, despite the original claims. A Bank of America "U.S. Economic Viewpoint" document recently said that the Fed's original goal of multiple hikes this year may be overambitious and probably won't occur over the summer. According to this view, the Reserve is more likely to make these hikes incrementally over the course of 2018, which will also be when it could tackle the goal of reducing its balance sheet.

The same source also said that the chance that a hike in June might happen decreased by 20 percent in the span of a week, at least in the eyes of the market itself. It also emphasized the goal of normalizing rates, and stated that it had previously claimed this could occur as late as 2022, and that the balance sheet adjustments could foreshadow an increase in Treasury securities.