Get ready to pay for a higher interest on your mortgage in 2017

Are you prepared for a higher interest rate on your mortgage next year?

Earlier this month, the U.S. Federal Reserve raised its benchmark interest rate from 0.5% to 0.75%. Mortgage rates have followed in lockstep, hitting levels not seen in more than two years.

And they could be going higher.

Economists at BMO Capital Markets say the Fed is probably going to look at two more interest rate hikes next year, bringing the benchmark rate to 1.25%. The Fed itself is projecting three hikes. For anyone with a fixed-rate mortgage, there’s probably little to worry about. But if you’re variable, or even refinancing a fixed-rate, be prepared to pay more.

There’s already evidence out there that Americans are bracing for more expensive mortgages. Data from shows that mortgage applications have spiked this month — an unusual event, as most Americans are too busy preparing for the holiday season this time of year to be house hunting.

Check out the graph below, originally reported by The Wall Street Journal.

While anyone planning to buy a home is no doubt closely studying mortgage rates, they should also be watching the bond market. Bond yields determine mortgage rates, and if recent moves are any indication, yields are going higher.

The two-year U.S. Treasury bond recently saw its yield rise 35 basis points to 1.2% — the highest mark in more than seven years.

Another factor that could push interest rates even higher next year is the presidency of Donald Trump, whose policies are seen as potentially inflationary — which could force the Fed to hike interest rates even faster. (For anyone who might have slept through their Economics 101 class, inflation refers to rising prices for goods and services — something that happens when demand for those things goes up. Because Trump’s policies focus on growing the economy, the expectation is wages and job availability will rise as a result, sparking more demand.)

Either way, if you’re in the market for a mortgage next year, you’re going to have to think long and hard about going with a fixed-rate or a variable-rate. For the last decade, variable has easily been the better call. But that could change if interest rates keep creeping up.