Mortgage

What the Fed’s new economic policy means for mortgage rates

What the Fed's new economic policy means for mortgage rates
Written by Publishing Team

Mortgage rate expectations changed after the last meeting of the Federal Open Market Committee (FOMC) last week. Here’s what you need to know. (iStock)

The Federal Open Market Committee (FOMC) met earlier this month to discuss changes to the Federal Reserve’s economic policy amid record inflation rates. Some of these policy updates will have a direct impact on the finances of US consumers – particularly the upcoming Fed rate hikes.

Federal Reserve Chairman Jerome Powell said at a press conference on December 15 that the central bank will speed up curtailment of its bond-buying program and look to seven interest rate increases through 2024, including as many as three in 2022 alone.

The Federal Reserve has kept the benchmark rate near zero since the start of the coronavirus pandemic to boost economic recovery. This has kept interest rates on a number of financial products near record lows. During this time, mortgage rates bottomed out in January 2021 due in part to the Federal Reserve’s economic policy decisions.

But the time to stabilize the historically low mortgage rate is running out. Mortgage rates tend to go up and down with the standard rate, so mortgage rates will inevitably go up when the Fed implements its first post-pandemic interest rate hikes next year. In fact, mortgage interest rates started to rise after the last meeting of the Federal Reserve Board.

Keep reading to learn more about the Federal Reserve’s impact on mortgage rates, including what you can do to combat rising interest rates. If you are planning to take out a loan to buy a mortgage or refinance, compare rates for free on Credible before increasing Next year.

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Mortgage rates rise after the last Fed meeting

Mortgage interest rates hit record lows in 2021, which is partly due to the Federal Reserve keeping the benchmark rate near zero.

Average 30-year mortgage rates fell to an all-time low of 2.65% during the week of January 7, according to Freddie Mac. For a 15-year mortgage, which is a popular option for homeowners looking to refinance, average rates fell to a record low of 2.10% during the week of July 19.

In the months since, mortgage purchase and refinance rates have risen by several points, hovering at 3% and above for the 30-year fixed-rate loan period since September. Mortgage refinancing rates for 15-year fixed rate loans are still relatively low, although they have rebounded between 2.3% and 2.4% in the same time period.

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When compared to the past few years, mortgage rates are still near their lowest levels. This means that it is still a good time for potential homebuyers and existing homeowners to take out a home purchase or refinance loan while prices are low – and before they inevitably go up.

You can compare rates across multiple mortgage lenders simultaneously on Credible to help you shop at the lowest possible rate for your financial situation. You can also use a mortgage calculator to estimate your monthly mortgage payments, as well as the total interest paid over the term of the loan.

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When do mortgage rates go up?

Experts predict that mortgage rates will start to rise significantly starting next year. Recent mortgage rate estimates from the Mortgage Bankers Association (MBA) say the average 30-year mortgage rate will be 4% in 2022 and 4.3% in 2023 and 2024. This compares to a 30-year average of 2.8% for 2020 and 3.1% for 2021.

In a statement after the FOMC meeting, MBA Vice President and Chief Economist Mike Fratantoni said average rates have remained low in the past year amid increased bond purchases by the Fed, but that they “may be more volatile as the Fed declines.” on the market” in 2022.

“Although this will lead to a decrease in refinancing, we expect a strong economy to support an increase in home sales in 2022,” Fratantoni said.

This sentiment was also expressed in the Freddie Mac’s Preliminary Mortgage Market Survey (PMMS), which said the rise in mortgage rates is “a result of economic improvement and a shift in monetary policy guidance” from the Fed.

We expect prices to continue increasing until 2022 which could leave some potential homebuyers with less space in their budgets on the sidelines.

– Freddy Mac PMMS

What you need to know before making a down payment on a home

With experts agreeing that mortgage rates will continue to rise as the Federal Reserve continues to update its economic policy, now is the time to secure a low mortgage interest rate if you’re planning to buy a home or refinance your existing mortgage.

You can start the mortgage application process on Credible by gaining pre-eligibility for a home purchase or refinance loan without affecting your credit score. You can also learn more about mortgage rates by contacting an experienced loan officer at Credible.

Experts say: Take advantage of the housing market now before prices go up

Have a question related to financing, but don’t know who to ask? Send an email to our certified money expert moneyexpert@credible.com And your question may be answered by Credible in the Money Expert column.

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