Stay informed about the latest news on inflation and mortgage rates by learning what the recent decision from the Federal Reserve (the Fed) means for you, the housing market, and your plans to buy a home. Stay ahead in the game and read on for the important details you need to know.
Inflation and the Housing Market
Although the Federal Reserve is making efforts to decrease inflation, recent data reveals that the inflation rate remains higher than the target of 2%. This led to the Fed's recent decision to raise the Federal Funds Rate. Bankrate reports that the Fed aims to control inflation by making these interest rate hikes. To combat an overheating economy due to the rebound from the COVID-19 recession in 2020, the Fed has raised interest rates for the 10th time in 10 meetings.
While mortgage rates are not directly determined by Fed actions, their decisions do have an impact and contributed to the deliberate cooldown in the housing market last year.
How This Impacts You
When inflation rates surge, your daily expenses inevitably increase, causing financial strain on your budget, especially with gas and grocery prices. However, the Federal Reserve’s decision to raise the Federal Funds Rate aims to combat inflation levels, which can eventually lead to a decline in mortgage rates and improve homeownership affordability. Elevated inflation rates often result in higher mortgage rates, but as inflation levels decrease, experts predict a downward trend in mortgage rates.
Where Experts Think Mortgage Rates and Inflation Will Go from Here
Housing market players need to brace themselves for the impact of both inflation and mortgage rates. According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), mortgage rates will potentially decrease later this year as consumer price inflation stabilizes. Similarly, Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), predicts a decline in mortgage rates as the economy slows. While no one can predict mortgage rates with certainty, experts believe that rates may trend down this year if inflation remains under control. For the latest insights, reach out to a trusted real estate advisor who can keep you updated on the latest from industry experts and how it may affect your plans for homeownership.
