Maine mortgage rates seen rising slightly after Fed move
Despite Wednesday’s rate hike by the Federal Reserve and signals of further gradual increases, experts say that Maine homebuyers can expect mortgage rates — and consumer borrowing costs in general — to rise only slightly.
The Fed raised its target rate to a range of 0.75% to 1.0%, noting a strengthening labor market, a moderate rise in household spending and prices heading towards its 2% long-term inflation objective. It also stuck to its expectation of two more increases this year, reassuring markets it will not pick up the pace.
Markets reacted favorably: Stocks rose on Wall Street and the bond market shaved off recent increases in interest rates. Yields on 10-year Treasury notes finished Wednesday at 2.49%, while yields on 30-year notes were at 3.10%.
Experts contacted by Mainebiz after the Fed announcement predict a continued favorable climate for the housing market in Maine, saying that mortgage rates will inch up only a little but generally hold steady.
“I don’t see any huge increases, but they will continue to tick upwards,” said John Reed, president and CEO of Hampden-based Maine Savings Federal Credit Union and of its CUSO Home Lending subsidiary.
CUSO, one of the largest mortgage lenders in Maine, shows a sample 30-year fixed-mortgage rate of 4.375% on its website, putting the full annual percentage rate at 4.506%. Bank of America lists similar rates.
Reed said that barring any catastrophe that could propel rates higher, “it’s going to be steady as she goes, and that’s good for the consumer.” He says that while it’s impossible to make an exact prediction, 30-year rates will probably run between 4.5% and 5%.
Low borrowing costs aren’t the only factor for house hunters in Maine, where there’s still an inventory problem in hot pockets like Portland. “If you’re going to sell a house you’d better pack your bags,” Reed said, “because it’s going to go under contract very quickly in southern Maine … The market is strong.”
Speaking more generally about long-term borrowing costs, Jessamyn L. Norton, chief investment officer and senior vice president at Spinnaker Trust, sees 10-year yields hitting 2.75% to 3% this year.
“However, we feel that interest rates will rise less and more slowly than they have in previous economic cycles due to global economic conditions,” she said.
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