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.