Hike or no hike on rates from the Federal Reserve, housing has far more important things to think about. Home sales, home construction and the whole housing economy are dealing with all kinds of pressing issues that take precedence over mortgage rates. Let us explain.
How can it be: If the Fed raises rates, won't mortgage rates spike and people will stop buying houses?
No. First, mortgage rates don't exactly follow the federal funds rate. They follow mortgage bond yields, and those yields loosely follow the yield on the U.S. 10-year Treasury.
Treasury yields move on several other issues, particularly on monetary policy overseas. So mortgage rates popped higher last week because the European Central Bank freaked out global financial markets. Now there is all kinds of drama in Japan too. And remember, as for the Fed moves, mortgage lenders like to price in all these expectations before the actual event happens. That's why mortgage rates rose last December in anticipation of the first rate hike and then fell after that due to other global economic issues.