Understanding How Inflation Impacts Mortgage Rates and the Housing Market | Expert Insights and Projections for Homebuyers
As a prospective homebuyer, you might have been keeping an eye on inflation and mortgage rates, but did you know that the recent decision from the Federal Reserve (the Fed) could impact your homeownership plans? Here's what you need to know.
Inflation and the Housing Market
The Fed has been working hard to keep inflation in check, but recent data shows that inflation is still higher than the target of 2%. This led to the Fed's decision to raise the Federal Funds Rate last week. According to Bankrate, "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 do have an impact 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, which means you might have felt the pinch at the gas pump and in the grocery store. By raising the Federal Funds Rate, the Fed is actively trying to lower inflation. If they are successful, it could ultimately lead to lower mortgage rates and better homebuying affordability for you. That's because when inflation is high, mortgage rates tend to be high too. But, as inflation cools, experts predict that mortgage rates will likely fall.
Where Experts Think Mortgage Rates and Inflation Will Go from Here
As Chief Economist at the National Association of Realtors, Lawrence Yun says, "Mortgage rates are likely to descend lower later in the year as the consumer price inflation calms down." Mike Fratantoni, Chief Economist at the Mortgage Bankers Association, explains, "We continue to expect that mortgage rates will drift down over the course of the year as the economy slows." While there's no way to predict exactly where mortgage rates will go from here, the experts think they will trend down this year if inflation comes down too.
Bottom Line
The latest decision from the Fed may have you scratching your head, but don't let it confuse you. Where mortgage rates go from here depends on what happens with inflation. To stay informed on the latest insights, connect with a trusted real estate advisor who can help you understand what the experts are projecting and how it could impact your homeownership plans. With expert insights on housing market changes, you'll be able to make informed decisions about your future home.