The big economic news was that the Federal Reserve raised the benchmark overnight Fed Funds Rate by 25 bps to a range of 1.50-1.75% on March 21st. While this rate is important, it does not directly impact mortgage rates which are more closely related to longer-term interest rates such as the 10-year treasury. These longer rates were on a sustained upward trend since September 2017, but have recently stabilized. As a result, mortgage rates have not had a significant upward move in March.
Looking forward, the tax plan and spending plans recently passed by Congress will add to the government deficit in 2018. When this happens, the government has to borrow more which can often lead to higher interest rates. Thus, the stability in interest rates seen in March could prove to be short-lived. In addition to the potential increase in mortgage rates driven by the deficit, there are some risks on the other side as well. The recent rumblings about trade wars could lead to lower interest rates if the impact on the economy or investors risk appetite is negative. If foreign buyers decide to purchase less US government bonds in retaliation, it could lead to higher rates. Clearly, there are many moving parts here. For mortgage borrowers, it’s best not to try and game out these scenarios and lock in their mortgage rate when they are ready to complete a transaction.
Released each month, The LendingTree Mortgage Offers Report contains data from actual loan terms offered to borrowers on LendingTree.com by lenders. Stay up to date with the most recent LendingTree Mortgage Offers Reports below: