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Fed raises rates; additional increases expected in 2018

The Federal Open Market Committee announced on Wednesday that it will increase the federal funds rate by 25 basis points to a range between 1.25% and 1.5%. This marks the third increase of 2017, with three more rate hikes expected in 2018.

The Fed anticipates faster growth in the coming year, noting in a statement it expects “economic activity will expand at a moderate pace and labor market conditions will remain strong.”

Despite no signs of inflation on the horizon, the Fed offered almost no change to interest rate projections. The average 30-year fixed rate mortgage stands at 4.08%,* still near historic lows. Not only does this present potential borrowers with an opportunity to purchase a home with a low rate in the coming months; it represents an opportunity to refinance, particularly for those with an adjustable rate mortgage.

If you fall into either category, now is an ideal time to contact your local loan officer and consider your options, as 2018 is widely expected to bring multiple rate hikes.

Fed FUNDS Rate Projections**


2017

2018

2019

2020

Longer Run

Dec. 13, 2017

1.4%

2.1%

2.7%

3.1%

2.8%

Sept. 20, 2017

1.4%

2.1%

2.7%

2.9%

2.8%

Basis points change

0.0%

0.0%

0.0%

0.2%

0.0%


Jeremy Collett is Guaranteed Rate’s Executive Director of Capital Markets. Market Updates are designed to provide readers with a high-level yet insightful view of how economic news, events and trends affect mortgage rates and the homebuying process.

*Bankrate.com (http://www.bankrate.com/finance/mortgages/current-interest-rates.aspx

** Federal Open Market Committee (https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20171213.htm)


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