Federal Reserve Raises Benchmark Interest Rate for Third Time in 2017

Federal Reserve Raises Benchmark Interest Rate

On December 13th, the Federal Reserve once again raised its benchmark short-term interest rate by 0.25%. This was the third rate increase by the Federal Reserve in 2017. With a positive economic outlook for this coming year, the Federal Reserve anticipates further increasing the benchmark interest rate another three times in 2018.1

So, what does that mean for mortgages? If you currently have a fixed-rate home loan, not much. The biggest impact will come for borrowers with adjustable-rate mortgages and Home Equity Lines of Credit (HELOCs), as they will likely see their mortgage interest rate increase the next time their rate is set to adjust.

In addition, those looking for a new home loan in the future – whether fixed or adjustable rate – may see higher interest rates than what we have been currently enjoying. While the Federal Reserve’s rate increases only indirectly impact fixed-rate mortgages, historically they follow the momentum of the Federal Reserve’s benchmark rate. So, it’s anticipated that as the Federal Reserve increases the benchmark rate, mortgages will continue on an upward trend as well.

1Source: USAToday.com (Published 12-13-17) https://www.usatoday.com/story/money/economy/2017/12/13/federal-reserve-december-decision-janet-yellen-interest-rates/946193001/

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