Interest rates headlines are all the buzz nowadays. Yes, after years, and years, and years of us writing that interest rates have nowhere to go but up, it’s finally happening. Interest rates are on the rise. So we thought we’d answer the primary question we’re constantly being asked about this long-forgotten feeling of increasing interest rates.

Question: “Will the recent rise in interest rates have a big impact on mortgage rates?”

Answer: Rule number one as we talk about rates: interest rates are not mortgage rates. Jumbo mortgage rates react differently than conforming rates; Interest Only ARM rates react differently than 10-year fixed ones. Interest rates certainly influence mortgage rates, but if you’ve ever been rate obsessed and called your mortgage broker asking for a refi rate after seeing some clip on CNBC about the falling 10-year yield, you know that it’s not that simple.

In fact, many financing experts are saying that Fed increases are already “priced in” to mortgage rates – meaning no move, at all. Hah! Go figure. Here’s more from the “pros”:

The Federal Reserve sets the rate for the overnight exchange of money by banks; governors adjust the rate to help curb inflation or stimulate growth, depending on their assessment of what would be best for the economy.

Although this rate is not the same thing as the mortgage interest rate that buyers pay when they take out on a loan on a home, movement of the Fed rate up or down can put pressure on mortgage interest rates.

“With this increase well anticipated by most markets, Keller Williams does not expect any dramatic change in the current path of mortgage rates. Rates will likely continue to slowly rise this year barring a change in the economic situation,” said Ruben Gonzalez, staff economist, Keller Williams, in a statement.

“While higher mortgage rates will likely have some downward impact on demand, housing remains very affordable by historic standards and we anticipate another year of healthy home sales despite an environment of increasing mortgage rates,” added Gonzalez.

What we do believe is that mortgage rates will likely trend up.  We therefore anticipate another year of solid activity, despite an upward trend in rates. More aptly put, we believe that local housing dynamics in the city, and supply and demand considerations, will be far more impactful drivers of the NYC market than will rate movements.

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