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And the Fed Speaketh…

By: Grant Moon 03/23/15 11:22 am

Did you miss the big announcement last week? Late Wednesday afternoon? Well, unless you actively follow stocks all day long or work in a mortgage company’s interest rate room you probably missed it. About every six weeks, the Federal Open Market Committee, or FOMC, holds its regular round of two-day meetings. At these behind-closed-door sessions they sit around discuss the nature of the economy and where they think it’s headed. They directly affect the cost of funds for banks and indirectly most every other interest rate from mortgages to car loans to credit cards. At the end of the second day they prepare comments for the media and the general public providing some insight as to when or if they will raise or lower rates.

Last Wednesday, they removed some key language that had been included in the previous two reports, specifically they would remain patient as it relates to rate increase. They removed the word “patient” this time around and the markets took notice. Wall Street recovered from its doldrums and the Dow broke through the 18,000 barrier once again. The Fed also stated they expected the Federal Funds rate to be around 0.625% from its current 0.25%. That’s a 3/8th percent difference by the end of the year.

Mortgage rates, VA ones included, have already priced in the initial 0.25% rise, as rates have risen by about that much since the first of the year. If the Fed does indeed follow through, maybe at the June round of meetings, it’s quite possible that mortgage rates will rise by another 3/8th of one percent. Not a lot in the grand scheme of things for those buying a home but it will have an impact. If you’re thinking of refinancing just as soon as rates got a little lower, you may have missed your chance.

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