The Federal Reserve met this week and at the end of their meeting announced the expected rate increase of .75% to the bank’s benchmark rate. This move was expected as inflation numbers had been running high. This was the 5th increase this year and the 3rd increase of .75%. These rate hikes have led to an increase in mortgage rates.
The Fed announced the .75 basis point increase and then added comments to their announcement. The committee commented about supply and demand imbalances, the Russia/Ukraine conflict, rising inflation (currently at 8.3%) as reasons for the rate increase. The committee likes to see inflation at 2%.
The Fed doesn’t set mortgage rates but their policies do impact banks’ costs to borrow and how banks price their loans. As a result, the Fed rate increases will cause mortgage rates to increase. The average rate on a 30 year mortgage surpassed 6% in September – it was about 3% in January.
So what does this mean for those looking to buy a home? Most lenders expected the Fed to raise rates by .75%, so that was priced into current rates. What lenders wanted to hear was the speech after the rate announcement. The comments after the meeting may mean more rate increases. At this time, the Fed is thinking they want to see the Federal Funds rate at 4.5% by the end of this year, that means more rate increases. So if you are thinking about buying or refinancing your home, you may want to move sooner than later. Also if you have a HELOC loan, you may want to look at locking in your line if you can. Talk to your loan officer about your options and then you can make an informed decision.
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
