The Fed’s Raise on Interest Rates May Be Good for Mortgage Rates!

What the Fed Rate Decisions Mean for Mortgages May Not Be What You Are Hearing in the Media.

When the Fed raised interest rates by .75% to help reduce inflation, the general media/social media "experts" had everyone expecting it to affect mortgage interest rates. This is not the case. Long-term interest rates for fixed-rate mortgages are generally not directly affected by changes in the federal funds rate. In fact, as many seasoned economists expected, the mortgage interest rates even dropped.

WHY?

The Fed sets the federal funds rate. The fed funds rate affects short-term loans, such as credit card rates and lines of credit. It does not affect adjustable rate loans that start with fixed rates for five, seven, or ten years.

Mortgage rates are determined by the bond market and not the Fed. The bond market anticipates what the Fed will do, and the effect of their moves is already factored into the price of long-term interest rates before it happens.

The Fed says they are raising short-term rates to stop the rise of inflation; this is seen as very positive by the Bond market.
Recent data shows our economy may not go into a deep recession and may be stronger than anticipated.
Capital from the entire world economy is being directed into the U.S. Bond market as it is seen as the most stable and safest place to invest.

It's important to understand the complete picture from a mortgage expert and not get caught up in the negative commentary put forth in the media and on social media. So, for now, we anticipate mortgage interest rates to remain close to where they are today and may even see more small decreases.

Please reach out to us directly if you have any questions!

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.