Tag Archives: Federal Reserve

The Fed Raises Rates – So Now What?


Federal Reserve

As expected, the Federal Reserve raised short-term rates today. This is the first such increase they’ve made in a year, and the second in a decade. So what’s it mean for real estate mortgages?

The Federal Reserve is the bank of the United States – they regulate monetary policy, and they provide stability within the central banking system. And while an increase in short-term rates might seem to be a bad thing, it’s actually an indication that the Fed sees the US economy in positive terms, and is bringing interest rates up to better mirror inflation. While it’s true that mortgage rates will now rise – local lender Robert Mitchell of Movement Mortgage is already reporting that they’ve seen rates rise to 4.25% – the truth is that this is really a sign of an improving economy. With quoted rates effective today of 4.25% on a 30-year fixed loan, let’s run some numbers to see what the difference in today’s advertised mortgage rates look like:

$200,000 loan at yesterday’s closing rate of 4.125% – Principal & Interest payment of $969.30
$200,000 loan at today’s current rate* of 4.25% – Principal & Interest payment of $983.88
* rate pulled from www.Movement.com

For home buyers, today’s news is going to mean a slight increase in the overall cost of a loan. Again, based on the calculations above, that cost is going to be minimal, but each hike in the Fed’s rate will mean a slight increase in the monthly cost of a home loan. And for sellers, it puts a small amount of downward pressure on you, as well – rising rates are going to keep a small number of buyers out of the market initially, but we’re predicting that’ll reset a bit as we head into the spring market. And remember – rates are still incredibly low, historically. The chart below, from HSH.com, shows 30-year conventional rates over the last 16 years.

30-year mortgage rates since 2000

30-year conventional rates since 2000


Federal Reserve and What It Means For Interest Rates

Allow me to introduce Brandon Nicely, branch partner in Alcova Mortgage here in Blacksburg.  The mortgage industry is literally changing on a daily – and sometimes hourly basis – and Brandon’s going to be bringing us the straight talk on what’s really going on in the industry, what’s happening with rates, and what to expect going forward.  And we’re going to hold him to every word, it’s as good as gold!  Okay … we’ll give him a little leeway.

He’ll be posting things here on the blog from time to time, if there’s something you want to know, email me and it’ll be passed along!  What should we call this series of posts?  Some NRVLiving swag for the winning entry!


The Federal Reserve was at it again last week making some big decisions for the future of home loan rates. The Federal Reserve made the announcement that there would not be any additional buying of mortgage backed securities past the first quarter of 2010. There had been speculation about the Fed increasing the purchases of Mortgage Backed Securities, but the meeting last week confirmed there will not be any more purchases of securities.

So what does all this Federal Reserve stuff mean and why is it important?

These statements by the FED means interest rates will climb between now and the first quarter of 2010. This will put us back in a normal market where the Federal Reserve is not buying securities to keep rates down. Rate increases will most likely climb above 6% but hopefully stay in the 6-7% range.

With some more positive news from the Housing industry inventory from unsold existing homes fell to lowest level since April of 2007 and existing home sales reports continue to show signs of improvement.

Don’t forget first time homebuyer tax credit will expire November 30th.

Brandon Nicely


Brandon is a branch partner at Alcova Mortgage.  He enjoys doing his taxes, firewalking and competitive eating, but not necessarily in that order.  You can reach him at brandon@alcovamortgage.com, or 877-552-7150.