In Janet Yellen’s last meeting as the Fed Chair, the FOMC has increased the Fed Funds Rate by 0.25% to 1.50%. From the press release:
“Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Averaging through hurricane-related fluctuations, job gains have been solid, and the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. On a 12-month basis, both overall inflation and inflation for items other than food and energy have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.”
The Fed states it’s likely there will be additional increases to the Funds Rate next year.
With exception to HELOCs (home equity lines of credit) that are based on the Prime Rate (which follows the Fed Rate), the Fed’s Fund rate does not directly impact other Mortgage Rates. However, mortgage rates are influenced by the actions the Fed takes as well as other market influences as mortgage rates are based on bonds (mortgage backed securities). The references to low inflation are currently helping keeping mortgage rates low.
So… if you have a HELOC or other debts that are attached to the Prime Rate, your interest rates just bumped up 0.25% and are set to continue trending higher with the stronger economy.
Most HELOC’s do not have “caps” or ceilings like traditional mortgages where rates can adjust (like ARMs). If you’re interested in refinancing to a fixed rate (which are low right now) click here for a mortgage rate quote. NOTE: I am licensed for homes located anywhere in Washington.