Mortgage rates and odds of December interest rate increase climb after Fed meeting

Yesterday meeting of the Federal Reserve’s Open Market Committee ended with the committee raising the short-term Fed Funds benchmark rate 25 basis points and signaling an intention of raising rates again in December and then three more times in 2019.

Yesterday the market thought the odds of another interest rates increase in December were about 77% and that the Fed would wind up raising interest rates just two more times in 2019.

Today, the financial markets are a bit more convinced that the Fed meant what it signaled yesterday.

The odds of a December interest rate increase climbed to 85% on the CME FedWatch tool, which uses prices in the Fed Funds futures market to figure the odds of a move by the U.S. central bank.

The yield on the 10-year Treasury didn’t budge much today, climbing just 1 basis point to 3.06%. The yield on the 2-year Treasury is now at 2.83%.

But the U.S mortgage market would have to be marked down as a believer.  Mortgage rates in the U.S. rose for a fifth straight week, reaching levels not seen in more than seven years, Freddie Mac reported today. The average rate for a 15-year mortgage climbed to 4.16% from 4.11% last week. The average rate for the more common  30-year fixed mortgage rose to 4.72% from 4.65% last week. That’s the highest rate for a 30-year fixed mortgage since April 2011. The interest rate on a 30-year fixed mortgage was 3.83% a year ago.

Danielle Hale, chief economist for Realtor.com, told Bloomberg that she expects the rate on a 30-year fixed mortgage to hit 5% before the end of 2018.

Higher mortgage rates are slowing the U.S. housing market. Contracts to buy previously owned U.S. homes fell in August by the most in seven months, the National Association of Realtors said Thursday.