Inflation and Interest Rates-What It Means to You

The Impact of Inflation on Mortgage Rates

If you’re reading headlines about inflation or mortgage rates, you may see something about the recent decision from the Federal Reserve (the Fed). But what does it mean for you, the housing market, and your plans to buy a home? Here’s what you need to know.

Inflation and the Housing Market
While the Fed’s working hard to lower inflation, the latest data shows that the number has improved some, the inflation rate is still higher than the target (2%). That played a role in the Fed's decision to raise the Federal Funds Rate last week. As Bankrate explains:

“Keeping its inflation-fighting streak alive, the Federal Reserve has raised interest rates for the 10th time in 10 meetings . . . The hikes aimed to cool an economy that was on fire after rebounding from the coronavirus recession of 2020.”

While the Fed’s actions don’t directly dictate what happens with mortgage rates, their decisions have impacted and contributed to the intentional cooldown in the housing market last year.

How This Impacts You
During times of high inflation, your everyday expenses go up. That means you’ve likely felt the pinch at the gas pump and in the grocery store. The Fed is actively trying to lower inflation by raising the Federal Funds Rate. If the Fed is successful, it could lead to lower mortgage rates and better home buying affordability for you. That’s because mortgage rates tend to be high when inflation is high. But, as inflation cools, experts say mortgage rates will likely fall.

Where Experts Think Mortgage Rates and Inflation Will Go from Here
Moving forward, inflation and mortgage rates will continue impacting the housing market. Economists at the National Association of Realtors (NAR) say that mortgage rates will likely maintain or decrease later in the year as consumer price inflation calms down.

A Chief Economist at the Mortgage Bankers Association (MBA) also explains that we can expect mortgage rates to keep drifting down over the year as the economy slows.

While there’s no way to say with certainty where mortgage rates will go from here, the experts think mortgage rates will trend down this year if inflation comes down too. Connect with us to stay informed on the latest insights. They keep their pulse on what’s happening today and help you understand what the experts are projecting and how it could impact your homeownership plans.

Bottom Line
Don’t let headlines about the latest decision from the Fed confuse you. Where mortgage rates go from here depends on what happens with inflation. If inflation cools, mortgage rates should tick down as a result. Let’s connect so you have expert insights on housing market changes and what they mean for you.

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