As expected, the Federal Reserve raised rates, a quarter of a of a percentage point for the first time since 2006. Despite the history-making move, the road back to normal will be a long one. FOMC officials made it excessively clear in post-meeting documents that the pace of increases will be gradual and dependent on the quality of economic data.
Here’s how it will impact our industry:
Housing Recovery – The housing recovery can greatly be linked to 30-year fixed mortgage rates that remain below 4 percent. Home sales are expected to total about 5.7 million this year, up from 5.4 million in 2014. With today’s housing recovery being supported by much more than simply low interest rates (job growth and a stronger economy) the slight interest rate rise is expected to have little impact on housing.
Rates – The Fed’s hike of a quarter of a percentage point will have only a very slight impact on mortgage rates. A 30-year mortgage rate is expected to drift from 3.9% to 4.1% over the year. This would add about $26 per month to the cost of an average 225,000 dollar mortgage.