Mortgage rate to hit 5% at end of 2017?

[k00L]

Yesterday night, the Fed said for first time that the federal funds rate will be at 3.75 percent at the end of 2017.
It means your mortgage rate of say sibor+1% will hit 5%.

It has huge implications not just for housing market, but also reits, bonds, and any instruments relying on cheap financing. Get ready everyone!

[princess_morbucks]

But for now, sit back and relax!
Federal Reserve to keep interest rates near zero despite fears of inflation

http://www.theglobeandmail.com/repor...ticle20640384/

[indomie]

Fed Officials Predict Fed Funds Rate to Rise to 1.375% End-2015
By Craig Torres
September 17, 2014 2:00 PM EDT 2 Comments

Federal Reserve officials raised their median estimate for the federal funds rate at the end of 2015 to 1.375 percent, compared with 1.125 percent in June.
The rate will be at 3.75 percent at the end of 2017, the Fed said today for the first time as it included that year in its Summary of Economic Projections. That is the same as Fed officials’ longer-run estimate. The median estimate in June for the long-run fed funds rate was also 3.75 percent.
Fed Chair Janet Yellen will elaborate on the outlook at her press conference scheduled for 2:30 p.m. today in Washington.
Related:Fed Keeps ‘Considerable Time’ Pledge as Growth Is ‘Moderate’
The central tendency estimate for the longer-run growth rate ranged from 2 percent to 2.3 percent, compared with 2.1 percent to 2.3 percent in June. A year ago, Fed officials forecast the economy’s potential growth rate at around 2.2 percent to 2.5 percent.
Fed officials’ central tendency estimates for 2017 showed gross domestic product expanding at 2.3 percent to 2.5 percent, with the inflation, measured by the personal consumption expenditures price index, rising by 1.9 percent to 2 percent. The unemployment rate will average 4.9 percent to 5.3 percent in the final quarter of that year.
The nation’s GDP will rise 2.6 percent to 3 percent in 2015, the projections showed, and 2.6 percent to 2.9 percent in 2016. The unemployment rate will range from 5.4 percent to 5.6 percent at the end of 2015 and 5.1 percent and 5.4 percent at the end of 2016, the Fed said.



I think they are too optimistic.

[bargain hunter]

there is an equal chance that interest rate increases some and stays there for a prolonged period of time as against the 3.75% expectation. e.g. rises to 2%+ by 2016 and stays around there for another 5 years type.

Fed Officials Predict Fed Funds Rate to Rise to 1.375% End-2015
By Craig Torres
September 17, 2014 2:00 PM EDT 2 Comments

Federal Reserve officials raised their median estimate for the federal funds rate at the end of 2015 to 1.375 percent, compared with 1.125 percent in June.
The rate will be at 3.75 percent at the end of 2017, the Fed said today for the first time as it included that year in its Summary of Economic Projections. That is the same as Fed officials’ longer-run estimate. The median estimate in June for the long-run fed funds rate was also 3.75 percent.
Fed Chair Janet Yellen will elaborate on the outlook at her press conference scheduled for 2:30 p.m. today in Washington.
Related:Fed Keeps ‘Considerable Time’ Pledge as Growth Is ‘Moderate’
The central tendency estimate for the longer-run growth rate ranged from 2 percent to 2.3 percent, compared with 2.1 percent to 2.3 percent in June. A year ago, Fed officials forecast the economy’s potential growth rate at around 2.2 percent to 2.5 percent.
Fed officials’ central tendency estimates for 2017 showed gross domestic product expanding at 2.3 percent to 2.5 percent, with the inflation, measured by the personal consumption expenditures price index, rising by 1.9 percent to 2 percent. The unemployment rate will average 4.9 percent to 5.3 percent in the final quarter of that year.
The nation’s GDP will rise 2.6 percent to 3 percent in 2015, the projections showed, and 2.6 percent to 2.9 percent in 2016. The unemployment rate will range from 5.4 percent to 5.6 percent at the end of 2015 and 5.1 percent and 5.4 percent at the end of 2016, the Fed said.



I think they are too optimistic.

[princess_morbucks]

http://www.businesstimes.com.sg/brea...ngapore-201409

THE forecasts that came out of the US Federal Reserve meeting overnight were relatively hawkish for interest rates outlook, but the language in the policy statement as well as comments from chair Janet Yellen remain dovish, the chief economist at Bank of Singapore said on Thursday.
"On balance, it supports our view that interest rates will rise in Q2 2015, but there was nothing to shock the markets," Richard Jerram said.
Mr Jerram said he was comfortable with the idea of raising interest rates now that the economy is returning to normal.
"Conceptually this should cause no great problems to the economy or to financial markets. However, there is a lingering concern that after six years of zero interest rates some unpredictable vulnerabilities might have built up."

[Arcachon]

But for now, sit back and relax!
Federal Reserve to keep interest rates near zero despite fears of inflation

http://www.theglobeandmail.com/repor...ticle20640384/

Like.

[lajia]

I agree with u that they are too optimistic on the unemployment rate....it could take longer time than expected to go between 5.5 to 6.
Economy no doubt is growing, but, productivity and income growth more likely to proceed. Therefore if the unemployment rate is still not what they wish for, then the low interest rate environment could last long long time.
My guess, your sibor plus fixed should hover below 2 even by end 2016.

Fed Officials Predict Fed Funds Rate to Rise to 1.375% End-2015
By Craig Torres
September 17, 2014 2:00 PM EDT 2 Comments

Federal Reserve officials raised their median estimate for the federal funds rate at the end of 2015 to 1.375 percent, compared with 1.125 percent in June.
The rate will be at 3.75 percent at the end of 2017, the Fed said today for the first time as it included that year in its Summary of Economic Projections. That is the same as Fed officials’ longer-run estimate. The median estimate in June for the long-run fed funds rate was also 3.75 percent.
Fed Chair Janet Yellen will elaborate on the outlook at her press conference scheduled for 2:30 p.m. today in Washington.
Related:Fed Keeps ‘Considerable Time’ Pledge as Growth Is ‘Moderate’
The central tendency estimate for the longer-run growth rate ranged from 2 percent to 2.3 percent, compared with 2.1 percent to 2.3 percent in June. A year ago, Fed officials forecast the economy’s potential growth rate at around 2.2 percent to 2.5 percent.
Fed officials’ central tendency estimates for 2017 showed gross domestic product expanding at 2.3 percent to 2.5 percent, with the inflation, measured by the personal consumption expenditures price index, rising by 1.9 percent to 2 percent. The unemployment rate will average 4.9 percent to 5.3 percent in the final quarter of that year.
The nation’s GDP will rise 2.6 percent to 3 percent in 2015, the projections showed, and 2.6 percent to 2.9 percent in 2016. The unemployment rate will range from 5.4 percent to 5.6 percent at the end of 2015 and 5.1 percent and 5.4 percent at the end of 2016, the Fed said.



I think they are too optimistic.

[Yuki]

Pardon my ignorance... does fed rate == sibor rate?

I agree with u that they are too optimistic on the unemployment rate....it could take longer time than expected to go between 5.5 to 6.
Economy no doubt is growing, but, productivity and income growth more likely to proceed. Therefore if the unemployment rate is still not what they wish for, then the low interest rate environment could last long long time.
My guess, your sibor plus fixed should hover below 2 even by end 2016.

[teddybear]

No, a big double NO NO!

The normal rate for Fed rate used to be 5.5%, so now they are targeting only 3.75% (so this is new "normal"...)

Since the normal rate for SIBOR is probably about 2-3%, the new normal for SIBOR may be just 1.36-2% only (if assuming same % i.e. x (3.75/5.5))...

And MAS is quite right when they stipulate interest rate for TDSR computation must be 3.5% because 2% + 1.5% spread = max SIBOR mortgage interest rate likely only 3.5% !!! Hip hip hooray!

Pardon my ignorance... does fed rate == sibor rate?

[Jem]

Hmm, if the fed rate is going to possibly stay this low til 2017 will you guys recommend to take up SOR in place of SIBOR now for a new housing loan?

[teddybear]

US$ exchange rate vs S$ has gone up, has SOR moved up yet?

Hmm, if the fed rate is going to possibly stay this low til 2017 will you guys recommend to take up SOR in place of SIBOR now for a new housing loan?

[bargain hunter]

its not but there is a positive correlation.

Pardon my ignorance... does fed rate == sibor rate?

[Yuki]

Thanks for explaining. Thats comforting to hear.

No wonder people are still snapping up expensive condos.

No, a big double NO NO!

The normal rate for Fed rate used to be 5.5%, so now they are targeting only 3.75% (so this is new "normal"...)

Since the normal rate for SIBOR is probably about 2-3%, the new normal for SIBOR may be just 1.36-2% only (if assuming same % i.e. x (3.75/5.5))...

And MAS is quite right when they stipulate interest rate for TDSR computation must be 3.5% because 2% + 1.5% spread = max SIBOR mortgage interest rate likely only 3.5% !!! Hip hip hooray!

[Yuki]

With Fed's latest announcement that they are officially ending Qe3..what's your forecast of the sibor rates for the next 5 years?

[lifeline]

useful calculator to work out the impact of rate change on your monthly instalment :

http://www.consumerhelp.ie/rate-change-calculator


all figures on 1 page along with the difference for easy viewing.

[Arcachon]

Hope this will explain why FED keep changing the goal post.