Mortgage ratesrose today following the announcement and–more importantly–the Fed’s updated economic projections.  The Fed holds 8 meetings a year.  They release an official policy announcement after all of those.  Four of the meetings are “special” and are followed not only by a policy announcement, but also by updated economic projections from Fed members.  These projections include an important “dot plot” of the Fed’s rate hike expectations.

The so-called dots have been more important than the actual announcement on some occasions.  While most of today’s press coverage will focus on the fact that the Fed finally enacted its plan to shrink its balance sheet.  That was widely expected, however.  Investors weren’t sure how the past few months of economic data and events would affect the rate hike outlook.  As it turned out, the Fed is more optimistic than investors anticipated.  That means they’re more willing stick with the previous rate hike outlook for 2017 and 2018, and those rate hike expectations have a direct bearing on today’s interest rates.

Conventional 30yr fixed rates didn’t spike in any brutal sort of way, but given that the past 2 weeks have already seen a somewhat abrupt increase in rates, today still managed to be unpleasant.  4.0% is now the most prevalently-quoted conventional 30yr fixed rate on top tier scenarios.  It had shared the stage with 3.875% roughly equally until today.  That leaves today’s rates at the highest levels in nearly 2 months.

Loan Originator Perspective

As most expected, the Fed today released the details for its upcoming balance sheet reduction.  They didn’t “raise rates” (increase their overnight rate), but the announcement confirmed the trend is NOT our friend.  Floating here is risky or worse, think we’ll see higher rates before lower ones.