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Mortgage FAQ: How Come Interest Rates Didn't Go Up Last Year?


​"HOW COME INTEREST RATES DIDN’T GO UP WHEN THE FEDERAL RESERVE RAISED THEIR RATE LAST YEAR? THE FED RAISED THEIR RATE A COUPLE OF TIMES IN 2017, BUT INTEREST RATES HELD STEADY. WHY?"

The interest rate that the Federal Reserve raises or lowers is not the actual interest rate you’d get on a mortgage. The Fed raises or lowers a key interest rate known as the federal funds rate, which in simplest terms is the rate banks charge each other to meet reserve requirements. This is different than mortgage interest rates, which is what lenders apply to home loans. Historically, the two rates have been loosely tied to each other—when the Fed raises or lowers the federal funds rate, mortgage interest rates tend to follow—but that pattern hasn’t been as pronounced lately.

In 2017, the Fed raised their rate three times, but mortgage interest rates weren’t affected to any great degree. One of the possible reasons for this is because outside pressures—such as the U.S. economy, bond yields, global economic conditions, and foreign markets—are having more of an influence on mortgage interest rates. Will this steady trend continue even if the Fed raises their key rate in the near future? That remains to be seen, but if you’re looking to buy or refinance in 2018, be aware that the Fed has indicated that more rate hikes are likely this year.

For more than 25 years, Omega Financial has been serving mortgage clients in Massachusetts. Our brokers have approximately 50 years in the mortgage business. You always will receive fast, courteous, and accurate information. Omega Financial, Inc. is a company duly licensed to operate in Massachusetts as a Mortgage Brokerage. We are located in the Town of Norwood, Massachusetts where we have been operating as Omega Financial Incorporated since 1988.

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