Fed Raises Interest Rates: What This Means For You

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Dear Clients,

The Fed just raised the Federal Funds rate another .25% in response to our strong economy.  This move was expected but the mortgage backed security (MBS) market is reacting negatively as the Fed implied a 4th bump possibly coming this year to help contain inflationary pressures.    For those of us who have equity lines of credit on their homes, this means your rate will increase by a quarter of a percent right away, as Prime Rate moves when the Feds move the Federal Funds Rate.  Another concern is that the tightening labor market could put upward pressure on wages, which business’s could back into the cost of their products.

The good news is that the economy keeps improving and unemployment is extremely low.  A strong economy is very welcome even if it means higher mortgage rates.    Even though rates have gone up, they are still considered low historically, especially for such a strong economy.

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