Mortgage rates will rise in response to yesterday’s Fed action.

If you’re in the process of shopping for a mortgage or buying a home, the longer you wait to commit, the higher your mortgage rate will likely be.  Call or send me an email and I will send you a rate quote based on what the market is doing today.

Rates are changing very quickly and every day counts.

The Federal Reserve said yesterday it is raising the rate it charges banks that borrow from the central bank when they run short of funds by a quarter percentage point, or 25 basis points, to 0.75%. The central bank said in a statement it made the move in response to improving financial market conditions.

Don’t everyone panic here, because the move is largely symbolic – banks do little borrowing at the discount window and the discount rate has no effect on the more widely watched federal funds rate, which measures the rate banks charge each other for overnight loans. That rate is expected to remain between 0% and 0.25% for the foreseeable future, given the slack in the labor market and the still fragile state of the economy.

But raising the discount rate allows Federal Reserve chairman Ben Bernanke to take another small step toward normal monetary policy, after the past two last years of  financial firefight.  The Fed also shortened the term of some discount window loans an  d raised the minimum bid in the term auction facilities it uses to supply overnight funds to banks.

The central bank said Thursday’s increase should “encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserve’s primary credit facility only as a backup source of funds” and added that it will “assess over time whether further increases in the spread are appropriate.”  It added: “The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy.”

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