Recently, the Fed hiked the Fed Funds Rate by another 0.75%. This was the fifth rate hike of the year and the Fed also projects hiking another 1.25% this year, which may mean another 0.75% hike in November and 0.5% in December.
Remember, the Fed Funds Rate is the overnight borrowing rate for banks, and it is not the same as mortgage rates.
But you may be wondering: How does this move in the Fed Funds Rate affect mortgage rates?
Mortgage rates are primarily driven by inflation, which is at a 42-year high. When the Fed hikes the Fed Funds Rate, they are trying to slow the economy and curb 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 control of inflation, we could see more volatility in mortgage rates. Reach out to a local loan originator to help you navigate these uncertain times and find you the best opportunities for a purchase or refinance.
