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Higher Mortgage Rates Keep Economy Afloat

Posted by Staff Reporter on Apr 29, 2016 10:20 AM EDT
Market Reacts To Federal Reserve Interest Rate Decision more big
CHICAGO, IL - DECEMBER 16 : Traders in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) react after it was announced that they Federal Reserve would increase interest rates December 16, 2015 in Chicago, Illinois. The Federal Reserves raised the interest rates for the first time since 2006 by 0.25 percentage points. (Photo : Joshua Lott/Getty Images)

The recent meeting of the Federal Reserve resulted in an upward push for a 30 year loan, settling at 3.66 percent. According to a report from Forbes.com, this is the highest mortgage rates have reached since Marc.

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On a year on year basis, the current rate is lower compared to 3.68 percent at the same last year. The housing market remained steadfast while the rest of the economic factors had dipped in volume. For its part, residential construction spending, remodeling spending and other related transactions grew by 14.8 percent.

Despite the dire numbers, FTN Financial Chief Economist Chris Low thinks that the economy would improve by the time spring comes around. He said, "There is not yet anything in the data to suggest the rebound will be anywhere near as strong as last spring's. For now, the Fed is right to be cautious."

He added that housing recovery is well underway and the mortgage rate increase may be for the short term.

During this same time, bond yields have been increasing and with it mortgage rates. According to a report from The Washington Post, the Federal Reserve, during its most recent meeting, decided to keep interest rates at the same level.

This Fed Reserve decision would eventually cause loan rates to decline, as soon as next week. Currently, according to the same news report, 30 year bonds earn 3.66 percent while the 15 year fixed rate average also jumped to 2.89 percent. The five year adjustable rate also climbed to 2.86 percent.

The market movement, according to Freddie Mac's Chief Economist Sean Becketti was 'a result of the Fed Reserve decision to keep rates at the same level.' This resulted in a 9 basis point drop in the ten year Treasury yield last Wednesday.

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