For the first time in nearly a decade, the Federal Reserve raised the target federal funds rate --by a quarter point. CNBC staffer Diana Olick takes a look the long term effect that this will have on 30-year fixed mortgage rates.
She first points out that mortgage rates follow the yields on mortgage-backed securities which means the are tied to the bond market which has yet to be sorted out. The Fed must first sort out these securities before seriously changing mortgage rates:
At some point, the Fed will have to stop that and let the private market back into mortgage land, but so far that hasn't happened. Mortgage finance reform is basically on the back-burner until we get a new president and a new Congress. As long as the Fed is the mortgage market's sugar daddy, rates won't move much higher.