The Fed rate hike may not mean higher payments

As many of you are aware, the Fed raised interest rates yesterday.  We are likely to assume that mortgage interest rates are sharply on the rise, but this doesn’t necessarily translate into higher mortgage interest payments. This morning I received a positive perspective this morning from Anette Sieverson, a mortgage broker I’ve known with many years. Here is her take:
 
I wanted to send out a short update on what happened today with the Federal Reserve raising rates. I know many people think this means that mortgage rates went up .25% but that’s not the case. When the Fed raises rates it’s the overnight lending rate that banks charge each other that goes up, not mortgage rates. The Fed rate hike can indirectly affect mortgage rates but in this case, since the increase was anticipated, the bond market had already priced in the hike over the last few weeks as we have seen mortgage rates rise. Today’s Fed move, and their comments after the meeting, actually ended up being positive for the bond market and we saw pricing improve. Fed chairwoman Yellen stated that future rate hikes will be data dependent so we may not see the 3-4 interest rate hikes as was previously speculated. What the Fed hike does impact are rates on Home Equity Lines of Credit tied to Prime and borrowers with an adjustable rate mortgage will see their interest rates go up.
I hope this helps when you are talking with clients who may be concerned about mortgage rates going up.
Please let me know if I can assist in any way.
Thanks,
Anettefe

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