Are mortgage rates tied to the Federal Reserve’s interest rate increases?
The answer: yes and no. The Federal Reserve doesn’t set mortgage rates. But, mortgage rates often respond to what the Fed does. For over a year, the Fed has been raising interest rates in an effort to reduce inflation. Historical trends show that once inflation comes down, mortgage rates do, too.
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According to Bankrate.com, there are other influences that can impact mortgage rates, including supply and demand. It turns out that mortgage lenders raise rates when they have too much business. If they need more customers, they’ll reduce rates to draw in business.
While it may seem that people are at the mercy of mortgage and interest rates, there are a few ways to lessen the sting if you’re about to take out a mortgage. First, shop around to be sure you’re getting the best rate (we can help with that!).
Next, keep your loan amount as small as is possible. If you have more money to put down on your new house, don’t hold back! Over time, you’ll be paying less money in interest and lowering your monthly payment if you make that bigger downpayment.
Finally, choose the loan term that is right for you. We can advise you on shorter-term loans that might help you to pay off the loan faster and with less of an impact from today’s higher interest rates. As experienced REALTORS®, we’re here to give you insight and advice about the homebuying process, from start to finish. Contact us to learn more!
