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How the Fed’s rate hike pause will impact the HECM

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Here’s how the Fed’s pause on rate hikes will impact the HECM

After 10 consecutive interest rate hikes of the Fed Funds rate, the Federal Reserve hit the pause button last Wednesday. The 12 members of the Federal Open Market Committee that directs the Fed’s monetary policy voted unanimously to leave the Fed Funds rate at 5-5>25%. It’s essentially a wait-and-see approach. “Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy,” the Federal Open Market Committee (FOMC) said in the June statement.

The next FOMC meeting is scheduled to be held July 25-26th.

So what is the relationship between the Fed Funds rate and the 10-year Constant Maturity Treasury rate which is used to determine the federally-insured reverse mortgage or HECM’s expected rate? To put it simply, it’s complicated.

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Editor in Chief: HECMWorld.com
 
As a prominent commentator and Editor in Chief at HECMWorld.com, Shannon Hicks has played a pivotal role in reshaping the conversation around reverse mortgages. His unique perspectives and deep understanding of the industry have not only educated countless readers but has also contributed to introducing practical strategies utilizing housing wealth with a reverse mortgage.
 
Shannon’s journey into the world of reverse mortgages began in 2002 as an originator and his prior work in the financial services industry. Shannon has been covering reverse mortgage news stories since 2008 when he launched the podcast HECMWorld Weekly. Later, in 2010 he began producing the weekly video series The Industry Leader Update and Friday’s Food for Thought.
 
Readers wishing to submit stories or interview requests can reach our team at: info@hecmworld.com.

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9 Comments

  1. Thanks Shannon. Always good info for we Reverse Originators.

  2. Some what helpful can always use good information from those in the know. .

  3. The issue will be how much buying power does the senior have when utilizing the HECM in a volatile market as this. Regardless of the “pause” in interest rates we have already seen the impacts with lower than normal LTV tables. It use to be age minus 10 would give you the LTV percentage but today it’s more like age minus 30.

    • Thank you, Brian. I would like to use your comment in our upcoming show. Would that be okay?

  4. Absolutely

  5. At 62 through 70, the approximation was your age in 2009 and earlier.

  6. What are LTV Tables? Are you referring to PLFs? Learn the industry’s terminology.


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