Yesterday, for the first time since 2006, the Federal Reserve announced a slight hike in interest rates following a unanimous vote by the central bank’s Federal Open Market Committee (FOMC). Rates doubled from 0.25% to 0.50%. In a statement issued by the Fed, the FOMC explained why it felt that the time for a rate hike was now, “Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes…”
Janet Yellen, chairwoman of the Fed, made sure to comment so to tamper expectations, saying that moving forward rate activity will, “likely rise only gradually over time.” One major factor analysts consider to be preventing more significant rate hikes is the relative lack of wage growth.
This news of a slight rate hike does not come as a surprise to those in the mortgage industry. Many expected this to happen last month, and recent growth in the purchase market suggests borrowers trying to get in on it before rates jumped. The Mortgage Bankers Association still projects a growth of about 10% in the purchase market despite the aforementioned gradual rate increases, though overall mortgage origination is expected to take a slight hit as the number of refinances will be reduced.
Let’s take a jump back to the last time the Fed raised interest rates (June, 2006):
The iPhone had not been invented yet.
Facebook was only available for student at a select few universities.
The #1 song in the country was “Hips Don’t Lie” by Shakira.
Taylor Swift was still a week away from releasing her first single, “Tim McGraw”.
The #1 movie in the country was Pixar’s Cars (the first one).