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  • Fed Doesn't Raise Rates... for Now

    September 21, 2016
  • The Federal Reserve Board met on Wednesday and the result of that meeting was a decision to leave the Federal Funds Rate alone…  for now.

    Fed Chair Janet Yellen pointed at a stagnant unemployment rate as the primary reason for not raising rates at this month’s meeting.

    Interest Rate PredictionsUnemployment numbers

    The unemployment rate in the US has now been “stuck” at 4.9% but Yellen maintains an optimistic outlook for the economy.  She hinted that the case for a rate hike later in the year has strengthened but policy makers favored keeping rates low now.

    In a statement after a two-day meeting, the Fed said, “Near-term risks to the economic outlook appear roughly balanced,” its first such positive assessment this year. It added that “economic activity has picked up” and “job gains have been solid.”

    Some analysts project a rate hike in December while others predict no hike at all for the remainder of 2016.

    So far this year, the Fed has kept the Funds Rate at 0.4%, the level to which they raised it last December.  There have been no increases this calendar year.

    Inflation continues to run at less than 2% and previous issues such as weak job growth, the Brexit vote, uncertainty in China, and instability in our domestic markets have all been reasons for the Fed’s resistance to raising rates so far this year.  As economic conditions improve, however, we can anticipate that rate hikes do lie in the near future.

    Fed Rate Not Tied to Mortgage Rates

    Remember, the Federal Funds Rate does not directly affect long term mortgage rates but it does play a role in the cost of loans such as Home Equity Lines of Credit (HELOC).  Since the Fed took no action this month but hinted that they may call for an increase later in the year, it may be smart to consider refinancing a HELOC now into a longer term loan that would not be affected in the event of a hike.

    With recent property value increases coupled with historically low mortgage rates, refinance opportunities are excellent for many home owners.

    If you have any questions or would like a free evaluation of your existing mortgage situation, just give me a call (714) 420-1997.