What the Fed’s New Economic Policy Means for Mortgage Rates

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

The Federal Open Market Committee (FOMC) met earlier this month to discuss changes in 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, especially the much anticipated rate hikes from the Fed.

Federal Reserve Chairman Jerome Powell told a press conference on Dec. 15 that the central bank would speed up cutting its bond buying program and was considering up to seven rate hikes by now 2024, including up to three in 2022 alone.

The Fed has kept the benchmark rate close to zero since the start of the coronavirus pandemic to stimulate economic recovery. This has kept interest rates on a number of financial products at record levels. During this period, mortgage rates hit record lows in January 2021, in part due to the Fed’s policy decisions.

But the time to lock in a historically low mortgage rate is running out. Mortgage rates tend to rise and fall with the benchmark rate, so mortgage rates will inevitably rise when the Fed implements its first post-pandemic rate hikes next year. In fact, mortgage interest rates have already started to rise following the last Fed meeting.

Keep reading to learn more about the Federal Reserve’s impact on mortgage rates, including what you can do to combat rising rates. If you’re thinking of taking out a mortgage purchase or refinancing a loan, compare Credible rates for free before they go up Next year.

THIS IS THE BEST WAY TO REDUCE YOUR MONTHLY MORTGAGE PAYMENT

Mortgage rates rise after latest Fed meeting

Mortgage interest rates hit all-time highs in 2021, which was due, in part, to the Federal Reserve keeping the benchmark rate close to zero.

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

In the months that followed, mortgage purchase and refinance rates rose several points, hovering between 3% and more for the term of the 30-year fixed-rate loan since September. Mortgage refinancing rates for 15-year fixed-rate loans, however, remain relatively low, rebounding between 2.3% and 2.4% over the same period.

SHOULD YOU PAY REDUCTION POINTS TO LOWER YOUR MORTGAGE RATE?

Compared to recent years, mortgage rates are still near the lowest. This means it’s always a good time for potential buyers and current homeowners to borrow a home purchase or refinance a loan when rates are low – and before they inevitably rise.

You can compare the rates of several mortgage lenders at a time on Credible to help you find the lowest possible rate for your financial situation. You can also use a mortgage calculator to estimate your monthly mortgage payment, as well as the total interest paid over the life of the loan.

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When will mortgage rates go up?

Experts predict that mortgage rates will start to rise significantly from next year. The latest Mortgage Bankers Association (MBA) mortgage rate forecast estimates that the 30-year average mortgage rate will reach 4% in 2022 and 4.3% in 2023 and 2024. This is compared to a 30-year average rate of 2 , 8% for 2020 and 3.1% for 2021.

In a statement following the FOMC meeting, Senior Vice President and Chief MBA Economist Mike Fratantoni said average rates have remained low over the past year due to rising rates. Fed bond purchases, but that they “could be more volatile as the Fed retreats to the market” in 2022.

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

This sentiment is also expressed in Freddie Mac’s latest Primary Mortgage Market Survey (PMMS), which indicates that the rise in mortgage rates is the result of “the economic improvement and a change in the direction of monetary policy” from the Fed.

We predict that rates will continue to rise until 2022, which could leave out some potential buyers with less room in their budget.

– Freddie Mac PMMS

WHAT YOU NEED TO KNOW BEFORE MAKING A DEPOSIT ON A HOUSE

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 lock in a low mortgage interest rate if you are considering buying a mortgage. home or refinance your existing mortgage.

You can begin the mortgage application process on Credible by pre-qualifying for a home purchase or loan refinance without affecting your credit score. You can also find out more about mortgage rates by contacting a knowledgeable loan officer at Credible.

TAKE ADVANTAGE OF THE HOUSING MARKET NOW BEFORE RATE INCREASES, SAYS EXPERT

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