Steve Keefe Blog

My take on the recent Fed decision to raise rates.

Posted: December 17, 2015 by Steve Keefe

For the last 7 years the Federal Reserve has kept interest rates at historical lows... Wednesday in a much anticipated move, they brought an end to that cycle by increasing the benchmark short term rate by 1/4%.

It appears the Fed will continue to gradually tighten rates over the next year.  Its likely mortgage rates will inch up slightly... which in my opinion will not stall the current housing recovery. 

The Fed controls rates that banks use to borrow money... a move in those rates is not directly tied to mortgage rates, but does end up being passed along to consumers through higher costs in consumer loans.

Even if the Feds raise rates several more times in this year, the overall effect will be minimal on housing, in fact it may fuel additional recovery as it contributes to confidence in the market.

Predictions are that mortgage rates will be affected about 1/2 to 2/3rds  of what the Fed does with short term rates.   Predictions are that rates will go from 3.93% prior to the hike to 4.65% in the next 12 months.

Another benefit which will likely increase activity is those fence sitters who have been waiting on the sidelines will recognize the end of the "low rate" era and jump into the game...

2015 was the strongest year of the last 7 years here on the mountain...  we are predicting 2016 should be very close to the 2015 numbers.

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