The Federal Open Market Committee (FOMC) which sets interest rates policy, increased the federal funds rate by 0.25% ,The question most families are asking is….what impact will it have on their Mortgages?
Unfortunately the bad news is that it does Federal funds rates are not as directly but indirectly linked to Mortgage rates. It’s the 10-year Treasury yield that mortgage are directly connected with. The 10-year Treasury yield is the yield that the government pays investors that purchase the specific security. Purchase of the 10-year note is essentially a loan made to the U.S. government. The yield is considered a marker for investor confidence in the markets, Since the source of the capital required to issue Mortgages is linked to the 10 year treasury, for all practical purposes they move along up and down together So the short it is that if your mortgage interest rates are not fixed then your mortgage payments will go up.
Wait a second before you panic. Let us also not forget that despite media hype, the current mortgage interest rates are still relatively low. Its still lover than historical averages. Its time to be proactive now. If you are planning to get a new mortgage or refinance your home, you may need to move fast as the govt says they will do least three more interest hikes in the next 12 months