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Mortgage Rates Spike Ahead Of May 2018 Federal Reserve Meeting

By Dan Green

The Federal Reserve meets for its third scheduled meeting of the year and it’s expected to hold the Fed Funds Rate unchanged until June; today’s mortgage rate trends for conforming, FHA, USDA, jumbo, and VA loans; and, with mortgage rates spiking, the importance of staying patient while you’re trying to buy a home.

The Federal Reserve Vs. May 2018 Mortgage Rates

Fed Funds Rate vs 30-Year Fixed-Rate Mortgage Rates - Growella
Fed Funds Rate vs 30-Year Mortgage Rates

The Federal Reserve gets together for a two-day meeting next week, the group’s third of eight scheduled meetings for the year.

The nation’s central banker is expected to announce no change in rates when its meeting adjourns, punting its next move to mid-June when the group gets together next.

But when the Fed votes “no change in rates” that doesn’t mean “no change in mortgage rates.” It means no change in the Fed Funds Rate.

The Fed Funds Rate is the prescribed interest rate at which banks borrow money from each other overnight. Mortgage rates are interest rates for loans tied to real estate.

The Federal Reserve sets the Fed Funds Rate. It doesn’t set mortgage rates. Mortgage rates are based on the price of mortgage-backed securities, instruments bought and sold on Wall Street, away from the Fed’s direct purview.

The Fed Funds Rate and U.S. mortgage rates are decoupled. If they weren’t, the two would move in tandem over time and that doesn’t happen.

Since December 2015, the Fed Funds Rate is up 1.50 percentage points. Over the same period of time, the average 30-year fixed-rate mortgage rate is up just 0.60 percentage points.

But, while the Fed doesn’t specifically set today’s mortgage rates, it does influence them. This is because what the Fed can speed up or slow down rates of inflation .

Inflation is the enemy of low mortgage rates.

Maintaining a stable inflation rate within the economy is one of the Federal Reserve’s two primary charters so when the Fed calls out inflation in its post-meeting statements, Wall Street — and mortgage markets — takes notice.

The Fed adjourns and issues its statement at 2:00 PM ET Wednesday, May 2, 2018. Mortgage rates may rise, fall, or stay unchanged in the moments that follow.

A safe play for today’s rate shoppers is to lock your mortgage rate with a lender before that statement hits.

Today’s Mortgage Rates

5-Day Mortgage Rate Trend - Growella
5-Day Mortgage Rate Trend

Mortgage rates are dropping into the last weekend of April, recovering some of the losses from earlier this week.

Remember that the specific rate you get from your lender is based on dozen factors including your credit score , your loan size, and your state of residence.

For borrowers with conforming loans, property type matters, too.

Buyers of condos will pay higher rates as compared to buyers of detached, standalone homes; and, same for buyers and house-hackers of multi-unit properties.

Lastly, don’t forget to comparison shop.

Statistically, you pay less when you talk to two or more lenders for a rate quote. Shop and find your best combination of rates, fees, and service.

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Buyers, Remain Patient When Mortgage Rates Change

Mortgage-Backed Securities (MBS) definition - Growella
Mortgage-Backed Securities (MBS)

A mortgage rate reversal is hitting hard at today’s buyers.

Mortgage rates have surged over the last ten days, wiping out early-year gains and pushing thirty-year fixed-rate mortgage rates to new, 4-year highs.

The typical home buyer now spends an additional $55 per month for every $200,000 borrowed to buy a house, and moves like that affect home affordability.

The answer to “How much home can I get approved for?” is falling and, for some home buyers, that will mean the difference between qualifying for a mortgage, and not-qualifying.

But, should you rush to buy a home just because mortgage rates are rising? No, you should not.

Because mortgage rates are unpredictable.

On some days, mortgage rates rise; and, on other days, mortgage rates fall. There are days when rates do both. And, because rates are made on Wall Street, anything can happen.

There have been days when mortgage rates change 5 times in six hours. There have been weeks when rates barely budge. As a home buyer, you can’t know what kind of market you’re in. You can’t know what tomorrow has planned.

So, don’t let rising mortgage rates create pressure to change your timeline; just like you wouldn’t for falling rates. You can only make the best of what mortgage rates are today and, for today’s live rates, talk with a loan officer to get a mortgage rate quote.

Written by Dan Green

Dan Green is a mortgage lending expert and the founder of Growella. Prior to Growella, Dan was a six-time, top-producing loan officer; and, ranked repeatedly among the top 1% of loan officers nationwide. Dan's home buying expertise has been in print and on TV with The Wall Street Journal, NPR, Forbes, CNBC, and others.

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