As predicted, the Federal Reserve has just raised its benchmark Federal Funds rate, upping its target range by another 0.25 percent (25 basis points) and signaling expectations for two more quarter-point increases in 2018, three in 2019 and another two in 2020.

The Fed dropped the benchmark rate five (5) percentage points between August of 2007 and the end of 2008, a move which helped drive mortgage rates down to an all-time low of 3.31 percent in 2012. The Fed has since raised its target by a total of 1.50 percent.

Following the Fed’s announcement today, the yield on 10-year Treasury notes, which drives the 30-year mortgage rate, jumped but has since settled back to around where it started the day. As of last week, the average rate for a 30-year mortgage was running around 4.44 percent and nearing a 5-year high with the probability of a rate hike this week already priced-in.

Comments from Plugged-In Readers

  1. Posted by Amewsed

    That will have an impact on home buyers with a need to finance, and the Bay Area’s high home prices.

    Best remedy: eliminate the bureaucratic red tape driving up time and costs of doing business. Eliminate the power plays local politicians and activists used to stifle development.

    • Posted by Pablito

      Absolutely. The ridiculous local bureaucracy adds far more to the cost of a project than the interest rate uptick. Of course – the entrenched ‘progressive’ forces only want to drive prices higher so its not likely to happen until the city voters vote for smarter politicians….

  2. Posted by Anon123

    LIBOR rates going up as well, which impacts many construction and business loans and will likely put the breaks on some projects.

    • Posted by Amewsed

      Yes, construction loans have short term variable interest rates so any 1-2 year delays will have a significant negative impact on the development. Same with any publicly traded companies with high debt loads.

  3. Posted by Sabbie

    Yeah right, we’ll get more QE before we get more seven more rate hikes.

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