June 14, 2018

After declining for two straight weeks, mortgage rates reversed direction this week and rose to their second highest level this year. The 30-year fixed-rate mortgage climbed eight basis points to 4.62 percent, and the Federal Reserve Board on Wednesday raised the federal funds rate by 25 basis points.

The good news is that the impact of rising rates on consumer budgets will be smaller than past rate hike cycles. That is because a much smaller segment of mortgage loans in today’s market are pegged to short-term rate movements. The adjustable rate mortgage (ARM) share of outstanding loans is a lot smaller now – 8 percent versus 31 percent – than during the Fed’s last round of tightening between 2004 and 2006.