With mortgage rates constantly fluctuating, you may be wondering: when is the best time to buy a home? In most cases, sooner is better than later – but it’s always a good idea to understand what affects mortgage rates and when.
In this article, we’ll cover the Federal Reserve, how it affects mortgage rates, and what you can do to stay prepared.
What is The Federal Reserve?
The Federal Reserve, also known as the Fed, is the central bank of the United States. One of its main responsibilities is to implement monetary policy, which involves setting the target for a key interest rate known as the federal funds rate. When the Fed increases this rate, it can affect other interest rates, including mortgage rates.
Learn about the Fed, how it regularly functions, and more.
How Does The Fed Affect Mortgage Rates?
When the Fed increases its target rate, it usually becomes more expensive for banks to borrow money, which in turn can lead to higher interest rates on loans like mortgages. This can make it more expensive for consumers to borrow money to buy a home, which can impact the housing market. However, the exact impact on mortgage rates can vary and is not always straightforward.
It’s important to note that the Fed does not directly set mortgage rates. There are many other factors that can affect mortgage rates, such as the overall state of the economy and the demand for housing. It’s also worth keeping in mind that the Fed’s target rate is just one of many factors that can influence mortgage rates, and it may not have a significant impact on them in the short term.
A Look Back: The Fed’s Rate Increases of 2022
Throughout the year, the Fed holds regular meetings to assess the state of the economy and implement interest rate changes when necessary. In the case of 2022, there were unprecedented increases in interest rates – a reaction to rising inflation that has had lateral effects on mortgage rates.
Stay Prepared With Total Mortgage
As the Fed continues to adjust interest rates in accordance with the national economy, it’s important to stay informed and make sure your mortgage rates are in check. Contact a Total Mortgage loan expert to learn more about the Fed’s changes, how your mortgage rate may change, and how you can be fully prepared.
Source: totalmortgage.com