US mortgage rates inched higher on Thursday to around 3.25%— the highest since mid April, following Fed Chairman Jerome Powell’s comments regarding the economy’s path to recovery.
Following the FOMC’s two-day meeting this week, the Fed indicated that it may begin to hike interest rates come 2023, but stopped short of providing a timeline of cutting back its extensive bond-buying program. “You can think of this meeting that we had as the ‘talking about talking about’ meeting,” Powell explained to reporters. In addition, the infamous “dot plot,” which depicts each FOMC member’s rate expectations as a dot, suggested that there will be not one, but two interest rate hikes before 2023.
Although mortgage rates do not track the Fed’s rate— which remained unchanged on Wednesday, they do follow the the yield on the 10-year Treasury, which jumped higher. In addition, mortgage rates are also influenced by the amount of mortgage-backed securities the Fed buys, which ultimately caught investors off-guard, causing mortgage rates and bond yields to rise by more than expected.
“Markets were somewhat surprised by the Fed’s rate hike outlook. Granted, the Fed Funds Rate doesn’t control mortgage rates, but the outlook speaks to how quickly the Fed would need to dial back its bond buying programs (aka ‘tapering’). Those programs definitely help keep rates low,” explained Mortgage News Daily chief operating officer Matthew Graham.
Information for this briefing was found via the Federal Reserve and Mortgage News Daily. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.