Market Update: Mortgage rates fall after Fed leaves rates unchanged

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The Federal Open Market Committee (FOMC) left interest rates unchanged and signaled to the market that the move to higher interest rates would be more gradual than previously forecasted. While economic data in the United States has seen modest improvement, the Fed cited that “global economic and financial developments continue to pose risks” to the pace of future rate hikes.

While the markets saw sharp reactions to the Fed decision, it was hardly a surprise. Interest rates have remained, for the most part, low in 2016, despite the Fed’s projected plan to raise rates four times this year. With revised projections now calling for only two rate hikes and many market participants doubting even that, bond and mortgage prices soared sending rates lower by 10 to 12 basis points. Since the announcement, mortgage bonds are up nearly a ½ point in price.

What does this mean for the consumer? It means that with the Fed’s waning confidence in the economy and the increasing threat of economic developments abroad, interest rates should remain low for the foreseeable future. Even with two interest rate hikes on the docket for 2016, as we saw in December, that doesn’t necessarily translate in to higher interest rates for consumers. In fact, 30 year mortgage rates actually dropped by more than .375 percent after the December rate hike.

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