As expected, the Federal Open Market Committee made their announcement at the end of the meeting this week – an increase of .50 as expected. They expect inflation to continue to decline but it is still higher than the Fed likes. So what does this mean for mortgage rates?
The Fed doesn’t set rates but interest rates do move in correlation to the Fed’s policy actions. After the November meeting we saw interest rates drop due to inflation numbers. Inflation has been improving but they are concerned about the higher energy costs and food prices along with Russia’s war against Ukraine. The Fed does expect slower economic growth in 2023. That weaker growth usually leads to lower interest rates.
The country is expected to enter a recession in 2023 and that would help lower rates. The Mortgage Banker’s Association is forecasting that mortgage rates for a 30 year fixed rate loan may drop down around 5.2% by the end of 2023. However mortgage rates are very volatile and no one expected rates to double in 2022.
The next Fed meeting is January 31-February 1, so the next month could be a great time to buy a new home. The more inflation reports we get, the better idea we’ll have of what the Fed is thinking.
This week the immediate reaction to the Fed announcement was very volatile -the bond market got a lot worse very quickly but then gained back everything it lost by the end of Wednesday. So we’ll see how the rest of the week plays out as investors go over the Fed announcement more thoroughly!
Hopefully we continue to see mortgage rates slowly decline as we move into 2023. For now, the next month could be a great time to buy a home!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
