The Fed's latest increase in interest rates will have little near-term impact according to LendingTree's chief economist
The Fed’s latest increase in interest rates will have little near-term impact according to LendingTree’s chief economist.
Tendayi Kapfidze says that mortgage rates for 30-year FRMs should remain in the range of 3.5%-4.5% for 2018 due to influences from around the world.
Although the US recovery has been robust since the global financial crisis – prompting the Fed to cut back on its quantitative easing program - that is not the case in many other parts of the world. Those central banks need to maintain a low interest rate environment and that means US treasuries are limited in how high they can go.
“Global investors view European and Japanese as comparable safe haven assets to US treasuries; thus their interest rates influence U.S. treasury rates which influence mortgage rates,” explains Kapfidze.
While 30-year mortgages shouldn’t see much change, those borrowers with ARMs and HELOCs are likely to be impacted by this week’s rate hike.
“5/1 ARM rates are at the highest since 2011 and will pass through most of the Fed Funds rate increase to reach new post-crisis highs. Home equity loans also move more closely with the Fed Funds rate and will pass through most of the 25 bps increase. Borrowers with outstanding ARM loans will see their rates increase at the annual reset and home equity borrowers will see immediate increases in their interest rates,” says Kapfidze.
Tendayi Kapfidze says that mortgage rates for 30-year FRMs should remain in the range of 3.5%-4.5% for 2018 due to influences from around the world.
Although the US recovery has been robust since the global financial crisis – prompting the Fed to cut back on its quantitative easing program - that is not the case in many other parts of the world. Those central banks need to maintain a low interest rate environment and that means US treasuries are limited in how high they can go.
“Global investors view European and Japanese as comparable safe haven assets to US treasuries; thus their interest rates influence U.S. treasury rates which influence mortgage rates,” explains Kapfidze.
While 30-year mortgages shouldn’t see much change, those borrowers with ARMs and HELOCs are likely to be impacted by this week’s rate hike.
“5/1 ARM rates are at the highest since 2011 and will pass through most of the Fed Funds rate increase to reach new post-crisis highs. Home equity loans also move more closely with the Fed Funds rate and will pass through most of the 25 bps increase. Borrowers with outstanding ARM loans will see their rates increase at the annual reset and home equity borrowers will see immediate increases in their interest rates,” says Kapfidze.
