To help fight inflation, the Federal Reserve has hiked its benchmark Fed Funds Rate six times this year, including their most recent hike of 0.75%, taking the Fed Funds Rate from 0.25% to now 4.0%. Remember, the Fed Funds Rate is the overnight borrowing rate for banks, and does not directly affect mortgage rates.
So, what do Fed rate hikes mean for mortgage rates?
Raising the cost of borrowing on certain items slows the economy down and incentivizes savings rates, driving down demand and thus curbing inflation. If the Fed is successful in cooling inflation, mortgage rates should decline. History proves this during rate hike cycles for the past 50 years.
But if the market doesn’t believe the Fed can get inflation under control, we could see more volatility in mortgage rates. If you’re looking to purchase a home or refinance a mortgage, reach out to me today. I can help you find the best opportunities in these uncertain times.