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Mortgage rates dipped slightly this week after rising in response to the Federal Reserve's decision to raise interest rates at its June meeting last week.  In its statement, the Fed pointed to a robust labor market, improving household spending, sustained business investment and accelerating inflation to support a 0.250% increase in the target Fed Funds rate to 1.750% to 2.000%.  The Fed's removal of measured language from its statement as well as highly positive comments on the economy by Fed Chair Jerome Powell also improved the probability of two more increases rate moves this year and in 2019 as well.

Although June's quarter point rate surprised few, there were mixed opinions prior to the meeting over the number of increases to expect for the remainder of 2018, with moderate wage growth, lower than targeted inflation and potential international trade wars providing rationale for the Fed to pause or slow future rate hikes.  Following meeting, however, there is greater certainty regarding the Fed's apporach for the second half of 2018.

While the increase in interest rates and the Fed's more hawkish outlook drove mortgage rates higher across the board last week, in good news for borrowers, we saw rates pullback for several programs this week.  It appears that by effectively telegraphing its intentions, the Fed brought increased stability to the mortgage market, which positively impacted rates for certain programs.

The mortgage rate for a 30 year fixed rate loan slid 0.125% higher to 4.375% while the rate for a 15 year fixed rate mortgage remained at 3.875%.  The interest rate on a 5/1 adjustable rate mortgage (ARM) was also steady at 3.875%.  FHA mortgage rates stayed put at 3.875%, matching VA mortgage rates which held at 3.875%, with both programs remaining attractive to borrowers focused on low or no down payment programs, especially first time home buyers.  Jumbo mortgage rates were stable 4.500% while non-owner occupied mortgage rates moved 0.125% lower to 4.625%.

Although the Fed's move to raise rates was widely expected, the mortgage market reaction to the news was better than expected.  Rates increased less than expected initially and dropped slightly this week.  We have seen rates gradually move higher this year in response to the Fed's forecast and expectations for future rate hikes were reinforced this week.  While interest rates are impossible to predict, prospective borrowers looking to buy a home or refinance their mortgage may be able to lock in a lower rate by acting sooner rather than later.  As lenders react differently to shifting market conditions, we have also seen the variation in mortgage rate pricing grow recently, which means borrowers benefit more by shopping multiple lenders.

Because rates fluctuate constantly, we continue to actively monitor the market for new developments.  Borrowers should check the FREEandCLEAR mortgage rate tables regularly to review personalized, updated mortgage rates for lenders in their area.  Our rate tables are free to use and require no personal information.