The cost of borrowing for a home keeps going up, a potential obstacle to would-be Boston condo buyers at a time when home prices are at all-time record high in some Boston neighborhoods.
Average long-term mortgage rates have been rising steadily this year and are now at the highest level in almost four years. That translates into higher mortgage payments and more money paid out over the life of the typical 30-year home loan.
Mortgage buyer Freddie Mac said Thursday that the average rate on 30-year, fixed-rate mortgages rose to 4.38 percent this week, up from 4.32 percent last week. That’s the highest rate since April 2014. At the start of the year, the average rate was just under 4 percent. The rate on 15-year, fixed-rate loans rose to 3.84 percent from 3.77 percent last week.
While the rate increase indicates a strong economy, it will mean higher interest rates for Boston mortgages and other consumer and business loans across the country. The Federal Reserve gave no indication that it plans to begin to reduce its large holdings of mortgage-backed securities (MBS) any time soon, and since Fed purchases of MBS have helped push mortgage rates lower, reduced demand for MBS from the Fed would be negative for mortgage rates.
About the Fed Funds Rate
The Federal Funds Rate is the rate at which banks can borrow money from each other overnight to maintain their reserve requirement. This rate is used to control the U.S. economy and is arguably the most important interest rate in the world. It not only affects all other interest rates, including mortgage rates, credit cards, and student loans, but also has a trickle-down effect that impacts the world economy.
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Updated: 1st Q 2018