Wednesday, December 16, 2015

It's finally here: Fed rules to begin gradual rate increases


The Federal Reserve Bank of Kansas City - Denver Branch includes a museum open to the public on the 16th Street Mall.

First rate hike in nearly 10 years at FOMC meeting is no surprise

The moment we've been waiting for years to come has finally arrived. And no, we're not just referring to the debut of "Star Wars: The Force Awakens Episode VII," which is coming to a theater near you Thursday night.

The Federal Open Market Committee voted this week to begin raising the central bank's interest rate by 0.25 percent, the first increase in nearly a decade. This move is a sign of confidence in the U.S. economy to weather higher interest rates, and it could also translate to bigger savings in your investment accounts accruing interest faster.

While news of this change could incite worry and even panic in borrowers and investors, there is little reason to be concerned. As mentioned previously, this increase has been anticipated for several years after a dormant period where rates were kept at 0 percent to stimulate growth and spending. The rate rise has been pushed back for the better part of the past year to wait until economic conditions were right.

Markets welcome news of rate increase

How did the markets react? Surprisingly, the stock markets seemed to warmly embrace the Fed's move after months of jitters as the Dow Jones industrial average ended the day up 224 points from Tuesday. Many economists had argued that prolonging a rate increase beyond the end of 2015 could have a negative effect. Fed officials have maintained that any further rate increases will come very gradually, not suddenly.

Meanwhile, new housing permits jumped to a five-month high in November, showing strength in the housing industry and backing the Fed's decision. Stay tuned here for updates on mortgage industry trends and other news impacting your home financing decisions.

Saturday, December 5, 2015

Jobs data solid; gradual rate hike expected

FOMC will hold last meeting of 2015 in mid-December

The November jobs report was released Friday with positive results: more than 211,000 jobs added to U.S. payrolls. This news was welcomed by Federal Reserve Chief Janet Yellen, bolstering the Fed's case for raising interest rates.

The Federal Open Market Committee will meet in less than two weeks and is widely expected to endorse the first central bank interest rate increase in nearly a decade. With continued steady job growth, modest wage gains and more personal wealth, Fed officials have finally been moving closer to raising rates.

However, don't panic: The first move to lift rates should be gradual, rising by only 0.25 percent initially. The idea is to ease into a slow, gentle shift back into rate territory above zero. Fed officials will continue monitoring economic data each month, looking especially at inflation rates. An inflation rate of 2 percent is targeted, ideally, but has remained stubbornly low.

How will these changes affect mortgage rates? They are loosely tied to the central bank's interest rates but are not guaranteed to mirror each other exactly. Some modest rate gains can be expected but will continue fluctuating based on market trends from day to day. If are in a position to refinance or buy a new home, don't hesitate to see what you may be eligible for by contacting a Vertex loan officer at 877-939-0339.