In another effort to tame inflation, the Fed increased policy rates by 0.75% at their July meeting, in line with expectations. Even with the anticipated Fed hike, mortgage rates have fallen since June, though with some volatility.
The Fed’s actions are intended to slow rising prices by inhibiting investment—creating less demand and thus tempering inflation. Whether this helps the broader economy remains to be seen.
Its impact on the housing market, however, is becoming clear. The frenzy of the last two years is fading along with the historically low rates we’ve enjoyed, returning the market to a more normal pace.
The Fed is expected to continue increasing rates at each meeting of the Open Market Committee as long as conditions warrant. Remaining 2022 meetings will occur in September, November and December.
Background on the Fed:
- The Federal Reserve Board (the Fed) controls the federal funds rate and discount rate, which are charges for overnight loans from bank to bank or from the Fed to member banks.
- The rate was lowered to near zero in March 2020 in response to the pandemic. These historic measures are now being reversed.
- This is the fourth increase this year.
What this may mean for you:
If you are planning a home purchase or any type of refinancing, including accessing cash from your home’s equity, it may pay to act before further increases. You may want to explore alternatives, such as a lower rate, hybrid adjustable mortgage (ARM) or home equity line of credit (HELOC).
I monitor interest rates and the markets every day. Please reach out if I can answer questions or be of service to you or your friends and family. I’ll be glad to help.