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Rate Hike: What Does it Mean?

The FED has officially announced another 75 basis point rate hike which is the 4th hike of the year. But what does that mean for mortgages? Technically, not as much as you may think. The federal funds rate sets the range that banks will lend or borrower to each other overnight. Yes, banks do this all the time and when they pay more you pay more. However, this is most influential on short term interest rates. Loans like credit cards, auto loans, personal loans, and home equity lines are closely tied to the fed funds rate. These loans have already been impacted and credit card rates will hit record highs before the end of the year. Home equity lines are quickly becoming more expensive and rising payments are hitting the pockets of loan holders. With fixed rate mortgages, rates are indirectly tied to the 10 year treasury but also impacted by Fed policy and other economic conditions. It’s safe to say we don’t root for FED hikes but don’t panic, mortgage rates actually went down this week.