Mortgage rates are falling ahead of the Fed meeting

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As the first Fed meeting of the new year concludes today, borrowers await any changes that might impact loan costs. Although the Fed is widely expected to keep rates steady, investors are worried that the growing coronavirus outbreak may cut economic growth in many countries and possibly the U.S., which may weigh on interest rates in general.

For mortgage borrowers, the current landscape looks promising: The average 30-year fixed-rate mortgage was 3.97 percent on Sept. 18, and had fallen to 3.77 percent on Jan. 22, according to Bankrate’s national survey of mortgage lenders.

Although the Fed’s policy doesn’t have a direct impact on mortgage rates, it’s part of the complete financial picture that influences rates. This picture also includes inflation, job growth, the price of U.S. Treasuries and whether the economy is growing or slowing.

Where are mortgage rates headed?

Experts are watching international headlines about the coronavirus, which can have a more immediate impact on mortgage rates. If investors get nervous and jump to safe-haven assets classes, like Treasuries — which are closely tied to mortgage rates — then consumers can look forward to possibly even lower rates in the coming weeks.

Short-term loans, like credit cards and adjustable-rate mortgages or ARMs, are more directly impacted by today’s Fed announcement. Those borrowers can see an increase, decrease or no change in loan costs depending on what the Fed does.

For ARM borrowers, average monthly rates are at a three-month low. In both November and December, the average interest on a 5/1 ARM was 3.9 percent; it was 1 basis point lower in January.

Experts predict that the Fed will leave rates unchanged today, which means the price of short-term loans will likely stay the same.

Written by
Natalie Campisi
Mortgage reporter
Natalie Campisi is a former mortgage reporter at Bankrate.
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