One the eve of 2018, Federal Reserve Chairwoman Janet Yellen has announced the third boost in interest rates of 2017. This increase will fall between 1.25 percent and 1.50 percent, and many are viewing the hike as a show of confidence in the U.S. economy. It is predicted that there will be three to four adjustments down the road in in 2018.
Lawrence Yun, Chief Economist for the National Association of REALTORS®, noted that this move will raise mortgage rates, including the 30-year fixed mortgage rate, in 2018. The current rate of 3.9 percent could see an increase of 25 basis points.
According to Yun, “It remains to be seen whether the effects are long-lasting or just for a short period of time. However, with the unemployment rate already at a low of around 4 percent, there is not much room to go further down. That means inflationary pressure will slowly develop. That is why the Federal Reserve today raised the short-term interest rates and will likely do so three more times in 2018… Economic stimulus will help with job creation and housing demand, but higher interest rates threaten to cut into housing affordability in 2018.”