The Federal Reserve voted Wednesday to continue to leave short-term rates alone, but hinted that a raise is still likely before the end of the year.

Fed Chair Janet Yellen offered an upbeat report about a strengthening economy, while still acknowledging the sluggish first half of the year. Employment is increasing and household incomes are too, she said. While the case for raising rates has strengthened, Yellen said there was no need to raise rates quite yet because inflation remains below the Fed’s 2 percent target.

“We judged that the case for an increase had strengthened but decided for the time being to wait for continued progress toward our objectives,” Yellen said at a press conference following the Fed’s policy meeting.

The Fed has kept the short-term interest rate near zero since 2008. It moved the rate up a quarter percentage point late last year but has kept them flat ever since. Economists largely predict the Fed will make a move to push rates higher at its mid-December policy meeting.

What’s this mean for housing? Mortgage rates don’t exactly follow the federal funds rate, but are loosely tied to it. Mortgage rates follow mortgage bond yields and the U.S. 10-year Treasury. Treasury yields fluctuate based on several factors.

“As for the Fed moves, mortgage lenders like to price in all these expectations before the actual event happens,” CNBC reports in an article called “Why Housing Doesn’t Care About the Fed.” “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.”

Will mortgage rates keep rising then regardless of what the Fed does? Economists weigh in.

“I think rates are going to stay low, not as low as now, but lower than we are used to,” Jeremy Siegel with the Wharton School told CNBC. “We may get another half-point, three-quarter point in the next two years, on the mortgage rate that’s not going to kill the housing market.”

The 30-year fixed-rate mortgage is around a 3.75 percent national average currently.

Source: “Fed Stands Pat, But Says Case for Rate Increase Has Strengthened,” The Wall Street Journal (Sept. 22, 2016)

“Mortgage rates continued to fall, albeit at a slower pace,” says Frank Nothaft, Freddie Mac’s chief economist. Mortgage rates are falling amid declining bond yields and oil prices, Freddie Mac notes.

Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 22:

• 30-year fixed-rate mortgages: averaged 3.63 percent, with an average 0.7 point, dropping from last week’s 3.66 percent average. Last year at this time, 30-year rates averaged 4.39 percent.
• 15-year fixed-rate mortgages: averaged 2.93 percent, with an average 0.6 point, dropping from last week’s 2.98 percent average. A year ago, 15-year rates averaged 3.44 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 2.83 percent, with an average 0.4 point, dropping from last week’s 2.90 percent average. Last year at this time, 5-year ARMs averaged 3.15 percent.
• 1-year ARMs: averaged 2.37 percent, with an average 0.4 point, holding the same from last week. A year ago, the 1-year ARM averaged 2.54 percent.

Source: Freddie Mac

“Mortgage rates fell to begin the year as 10-year Treasury yields slid beneath 2 percent for the first time in three months,” says Frank Nothaft, Freddie Mac’s chief economist. “Meanwhile, the Fed minutes indicated ongoing discussion regarding the timing of the first rate hike.” Many housing economists have predicted that mortgage rates will rise sometime this year, with the 30-year fixed-rate mortgage likely reaching the upper 4 percent or 5 percent range by the end of the year.

Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 8:

• 30-year fixed-rate mortgages: averaged 3.73 percent this week, with an average 0.6 point, dropping from last week’s 3.87 percent average. The 30-year rate has not averaged this low since May 23, 2013, when it was 3.59 percent. A year ago at this time, 30-year rates averaged 4.51 percent.
• 15-year fixed-rate mortgages: averaged 3.05 percent, with an average 0.5 point, dropping from last week’s 3.15 percent average. Last year at this time, 15-year rates averaged 3.56 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 2.98 percent, with an average 0.5 point, dropping from last week’s 3.01 percent average. A year ago, 5-year ARMs averaged 3.15 percent.
• 1-year ARMs: averaged 2.39 percent, with an average 0.4 point, falling from a 2.40 percent average the previous week. Last year at this time, 1-year ARMs averaged 2.56 percent.

Source: Freddie Mac

The Senate approved the bill in a 76-16 vote.

The Mortgage Debt Forgiveness Act expired at the end of 2013, making distressed home owners responsible for paying taxes on “phantom income” from the forgiven debt once their properties are sold. The tax on a 2014 short sale or workout would have been due this coming April 15 had Congress not extended the measure.

The average short sale has a mortgage forgiveness of about $75,000.

The National Association of REALTORS® issued a call to action earlier this month, urging REALTORS® to submit letters to their Congressional representatives in support of extending the Mortgage Debt Forgiveness Act.

“NAR applauds Congressional leaders in both chambers for their effort to pass this legislation before adjournment,” NAR President Chris Polychron said in a statement. “REALTORS® strongly supported the bipartisan Mortgage Forgiveness Tax Relief Act, which was included in the package to prevent underwater borrowers from paying taxes on any mortgage debt forgiven or canceled by a lender in a workout, or after their home was sold for less money than was owed.”

The extension will only apply to short sales conducted in 2014. Any further extensions will have to be considered by the new Congress, which begins its 2015 session in January.

Source: “Senate Approves Short Sale Tax Breaks,” HousingWire (Dec. 17, 2014)