Next week the Federal Reserve meets, this will be an important meeting for lenders and anyone looking to buy or refinance their home. Inflation is near 40 year highs and the Fed announced in January that they were going to increase rates and stop buying mortgage backed securities in March. Interest rates increased with a possibility of a .50 point increase by the Fed. Mortgage rates increased by 37 basis points in the next four weeks. Most investors now expect the Fed to raise rates by .25 point. This expectation has been priced into the market but it sill will depend on what the Fed says in their announcement after the meeting.
But then war broke out in Europe with Russia invading Ukraine. That brought uncertainty to the markets and a flight to safety for investors – this is typical but while rates did fall a bit, it wasn’t as much as many had hoped. Then in the last week, we have seen mortgage rates start to slowly increase again. So what happens next?
Most experts predict mortgage rates will increase throughout 2022 and the decisions in this Fed meeting next week will influence what happens with mortgage rates.
The Fed doesn’t set interest rates, but they do set the federal funds rate and that does affect home equity line interest rates and credit card rates. It also influences mortgage rates.
Mark Palim, deputy chief economist and vice president at Fannie Mae thinks that most investors will be watching the price of oil. Rising gas prices slow the economy but also add to inflation. High oil prices mean you should not be raising interest rates. A lot will depend on how long the war in Ukraine will last.
So what does that mean for those looking to buy a new home this year? Expect mortgage rates to increase but maybe not as fast as they have been. The bottom line is this may be the best time to lock in a low rate right now. Interest rates will more than likely continue to increase and rates are still historically low. Higher than they were, but still much lower than they have been in the past!
Leslie Vanderwerf, NMLS ID#335509, Cross Country Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
