Fed raises rates today, now what?

mortgage interest rates

The Federal Reserve met this week and raised rates by .25 point. There had been lots of discussion on whether the Fed would hold off on raising rates or go ahead with a .25 point increase. Until Silicon Valley Bank crashed, the Fed had been expected to raise rates by .50 point. The more important part of the Fed meeting was the announcement and the Q&A by Fed Chairman Powell after the meeting.

The Fed’s press release included the comment that it will “closely monitor incoming information and assess implications for monetary policy”. They will also adjust their stance if risks emerge. Their goal is still to bring the average annual rate of inflation down to 2% over the loan term. Inflation had surged to 9.1% in June of 2022, the most recent reading in February was 6%.

The bond market liked the comments and as of the end of Wednesday was reacting positively to the news from the Fed. The Fed dot plot projections still shows 5.1%, unchanged since December 2022. This implies one more .25 point increase this year. The Fed’s action this week could point to a downward trend for mortgage rates. There are many economic indicators pointing to the US entering a recession ins 2023 and for mortgage rates to decline overall. However, we may see volatile interest rate movements as we move forward this year. The Fed is watching economic reports and we know the shelter costs have been a big part of the inflation numbers. Those costs should come down as they typically lag behind. The overall inflation numbers for May should be an improvement which also could help interest rates.

The bottom line is rates have improved since last fall. Home prices continue to stabilize and in the metro area, we are still seeing multiple offers on many homes. If you are thinking about buying, now is a good time. We are offering those buying now a chance to refinance without any lender fees if rates drop between now and December 2025. This gives you a chance to save on a refinance down the road. As home prices are expected to increase over the next few years, it makes sense to buy now. As I have heard many times lately, you date the rate but marry the house! In other words, it’s important to get into the home you want and as rates drop, you can always refinance!

Leslie Vanderwerf,  NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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