On Wednesday, the Federal Open Market Committee [1] (FOMC) will hold its monthly meeting—and in anticipation NerdWallet [2] reported that mortgage rates for both 30-year and 15-year fixed-rate loans, as well as 5/1 ARMS, dropped. While market watchers do not anticipate policy changes to come out of this month’s meeting, in light of last month’s interest rate hike it seems as if that is not enough to ebb the pre-meeting caution the market is experiencing.
According to NerdWallet, on Monday that the 30-year fixed mortgage rate is at 4.16 percent APR (-0.04), the 15-year is at 3.54 percent APR (-0.04) and the 5/1 ARM is at 3.82 percent APR (-0.01).
Michelle Girard, Managing Director and Chief Economist of NatWest Markets at the Royal Bank of Scotland [3], forecasts that while rates will most likely stay the same this week, this will probably not be the case for the rest of the year.
Barrons.com [4] reported that Girard predicts four rate hikes in total this year into early next year. “We also look for the Fed to announce a change to its reinvestment policy in Q4, and to begin tapering purchases of both Treasurys and MBS in January 2018. By October 2018, we believe all reinvestment will be ended. Market participants look for fewer rate hikes in 2017 (and beyond), in part because they believe that changes in the Fed’s balance sheet may “substitute” for interest rate hikes. However, we expect the Fed to maintain its once-per-quarter hiking pace through 2018 even as reinvestment is ended,” said Girard.
At its last meeting, the Fed raised interest rates to a range of 0.75 percent to 1 percent. After the hike, Fed Chair Janet Yellen commented, “It is important for the public to understand that we're getting closer to reaching our objectives."