Mortgage rates fell at their fastest pace of the year following today’s rate hike announcement from the Fed.
If you’re wondering why mortgage rates fell while the Fed’s rate moved up, you’re not alone. Fortunately, the explanation is simple. Financial markets had already fully accounted for the chance that the Fed would hike rates today. They’d even gone a step further an begun to account for a faster pace of future rate hikes. And it was that future outlook that allowed for our pleasant surprise.
As it turns out, the median forecast among Fed members didn’t see the Fed Funds rate ending the year any higher than the previous batch of forecasts (both for 2017 AND 2018). While there was no way to know exactly how much markets had prepared for the forecasts to move higher, it was certainly more than “not at all.” In other words, rates had recoiled in fear over the past few weeks, expecting to see a very scary monster today. When the monster turned out to be cute and cuddly (relatively), rates calmed down quickly.
The average lender offered mid-day improvements that brought rates 0.125% lower, on average. In terms of conventional 30yr fixed rates, most lenders are back down to 4.25% now on top tier scenarios.
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