In the first of what is likely to be a series of several future hikes, the Federal Reserve raised the federal funds rate from 0% to 0.25%-0.50%. The long-anticipated move is part of the Fed’s plan to curb inflation, which is surging at its highest level in 40 years.
What does this mean for mortgage rates?
Mortgage rates have been steadily climbing this year, and a series of Fed rate hikes suggest that mortgage rates will continue rising. While the Fed does not directly set mortgage rates, it does influence them. Historically, when the fed funds rate has gone up, mortgage rates have often followed suit.
Mortgage rates are still historically low
It’s important to remember that mortgage rates remain at historic lows, but that doesn’t mean they’ll stay that way. The higher rates go, the more it will erode people’s homebuying power. Homebuyers can make their money go further by taking advantage of today’s low rates before they climb higher.