What does the Fed rate increase mean for mortgage rates?

The Fed increased policy rates by 0.75% at their September meeting and indicated they will continue raising rates until inflation is tamed.

Mortgage rates may not rise a the same pace as policy rates.

But that doesn't mean mortgage rates will rise at the same pace. Why?

• Market forces also influence mortgage rates. If investors shy away from stocks and invest in safer mortgage bonds, for example, rates may come down.

• If the Fed moves policy rates too far or too quickly, we could see a recession. Historically, that means lower mortgage rates.

• Mortgage rates had already risen in anticipation of a Fed move. They may settle down now that the Fed has spoken.

Does this mean you should wait for the possibility of lower rates? Not necessarily.

You should not necessarily wait for lower rates before buying a new home.

We encourage our clients to consider all the moving pieces—not only in the markets but also in their lives. If this is the right time for you to buy a home or access cash from equity, then finding a way to work within the framework of the current interest rate environment is in your best interest. After all, rates are still lower than long-term averages, and there are options like hybrid ARMs, buydowns, and HELOCs that can help in this environment.

The Federal Reserve lowered interest rates in March of 2020 in response to the pandemic. The rates are now going up again.

Background on the Fed:

• The Federal Reserve Board (the Fed) controls the federal funds rate and discount rate, which are charges for overnight loans from bank to bank or from the Fed to member banks.

• The rate was lowered to near zero in March 2020 in response to the pandemic. These historic measures are now being reversed.

• This is the fifth increase this year.

Don't let interest rates hold you back from making a move or accessing cash. We can help you navigate this market.