This week marked the fourth 2017 meeting of the FOMC, and as expected a .25%  increase to the federal funds rate was announced. The Committee’s statement supported its action, which puts the latest target range at 1.0% to 1.25%, based on “realized and expected labor market conditions and inflation.” As any market watcher knows, the fed funds target rate indirectly affects interest rates across the board, from mortgages to credit cards. However, the economy is more complicated than the results of a single FOMC meeting, so let’s take a look at what experts are predicting for rates in the near- and medium-term.

Are mortgage rates on the rise?

While this latest rate hike signals the third since December 2016, mortgage rates have not seen significant jumps in the first half of the year. Mike Fratantoni, chief economist at the Mortgage Bankers Association, said that “Even though the U.S. economy is really looking pretty strong right now, particularly in the job market, the rest of the world is lagging behind.” This, in turn, helps to keep longer-term rates (like mortgages) in check. In fact, according to Sean Becketti from Freddie Mac, the average 30-year fixed rate is close to a 7-month low, “which is very good news for those potential homebuyers in the market and even those who may be looking to refinance.” The three economists quoted by USA Today predicted 30-year fixed interest rates to end up anywhere between 4% and 4.5% by the end of the year.

Will the Fed balance sheet affect mortgages?

In addition to the rate hike, the FOMC also noted that it will begin to unload its balance sheet, which has reached almost $5 trillion, a third of which are mortgage-backed securities bought as a response to the financial crisis. The Fed plans to gradually unwind these holdings to prevent any huge shock to the markets. But Blu Putnam, chief economist at the CME Group, estimates this action could add 0.25% to 15- and 30-year mortgage rates over the next year.

Looking Ahead at Rates

In general, experts have expected a total of three rate hikes throughout 2017. The third has been anticipated to take place in September because, just as the rate hikes from the March and June meetings, the September meeting includes a scheduled press conference from Chair Janet Yellen. But this month’s FOMC statement indicated a slight weakening in some economic indicators; specifically, inflation declined and is currently under the Fed’s 2% target. This leaves experts wondering whether or not another rate hike for 2017 is truly in store.

Regardless of the anticipated trajectory of mortgage rates, they currently remain close to historic lows. Check out today’s rates by contacting one of our knowledgeable mortgage bankers.