Back to All Blog Posts

Federal Reserve Decides to Raise Mortgage Interest Rates

Commercial Mortgage
Posted on 
December 22, 2016

Last week, the Federal Reserve decided to raise the funds rate. In a unanimous vote, the central bank’s Federal Open Market Committee (FOMC) chose to move forward with raising mortgage interest rates, according to National Mortgage Professional.

“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to one-half to three-quarter percent,” said the FOMC in a statement. “The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to two percent inflation.”

The FOMC expects to increase rates gradually as the economic situation continues to evolve, and stressed that “the actual path of the federal funds rate with depend on the economic outlook as informed by incoming data.”

The announcement did not come as a surprise to those in the industry, and the immediate reactions to the mortgage interest rate hike are cautiously optimistic.

Jamie Woodwell, vice president of commercial real estate research at the Mortgage Bankers Association (MBA) said, “After a year of waiting, markets have given the Fed a window to resume raising the Fed Funds rate.  The move has been so widely telegraphed, and anticipated, that it is not likely to have a significant short-term impact on borrowing rates. The real news is in the expectations of how they will act in 2017. For commercial real estate, the increase is the latest signal that the ultra-low rates of 2016 are likely not the long-term norm, and that borrowers who have not locked-in long-term, fixed rate financing will want to be vigilant about how both short- and long-term rates move going forward.”


You might also be interested in