The FOMC kept interest rates unchanged, but that doesn’t mean the latest meeting was uneventful. The Fed unveiled a timeline to begin unwinding its massive balance sheet, while recent economic news made more economists doubtful about whether another rate hike will occur at all this year. Find out exactly what happened at this week’s Federal Open Market Committee meeting and how it could affect you.
The Big Story: The Fed’s Big Balance Sheet
We all know that mortgage rates have been historically low over the last several years, in part due to the Fed’s massive purchases of U.S. Treasuries and mortgage-backed securities. Throughout the process (which primarily occurred during three rounds of “quantitative easing”), the Fed amassed a balance sheet of a whopping $4.5 trillion — well above historical norms.
What stuck out from the FOMC’s statement is that the Committee plans to “begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated.” While the results of this program can’t be accurately predicted, experts cite the potential for a jump in interest rates across the board if the balance sheet is unwound too quickly. The FOMC’s normalization plan does state that it will take six years to sell off all of the assets accumulated during the recession.
Upcoming Economic Indicators for Mortgage Rates
The FOMC voted to keep the target fed funds rate the same for the time being, which is good news for those looking to buy a new home or refinance their existing one. Initially, the Fed alluded to one more rate hike for 2017, bringing the year’s total to three. But some experts believe that this may not be the case based on the economy’s overall performance. Several economists are predicting that last month’s increase will be the final one for the year. While only time can tell, it is an interesting development that homebuyers should keep an eye on in the coming months.
Other recent economic news brings glad tidings to anyone looking for a mortgage in the near-term. With lower-than-expected inflation rates and low Treasury yields, mortgage interest rates actually declined last week. Fannie Mae reported that the average 30-year fixed rate mortgage dropped below 4% to 3.96%. The average 15-year fixed rate also dropped from 3.28% to 3.21%, giving an overall positive trajectory in the eyes of potential homebuyers.
Ready to see how mortgage rates are trending in California? Contact a loan officer today!