People would be understandably confused if they were to try and square the Federal Reserve’s (“the Fed”) words with the behavior of mortgage rates. The Fed has strongly stated that they intend to keep interest rates low, and nearly 90% of Fed officials don’t expect a rate hike until 2023 (the other 10% think 2022 is the year), but the rate on the 30-year fixed-rate mortgage (“FRM”) has increased significantly since the start of the year; it is currently sitting at 3.09%, which is the highest it’s been since July 2020.
The Fed’s interest rates don’t directly impact mortgage rates, they control short-term interest rates (whereas mortgages are long term). However, many mortgage lenders follow the Fed when setting their rates. Since COVID took hold over the United States, the Fed has generated significant liquidity in the market by purchasing mortgage-backed securities. If, and when, the Fed reverses it’s push to pump liquidity into the market, lenders will likely feel a pinch; in response, banks will likely raise their rates even more.
Mortgage rates have been increasing since the start of 2021, but still remain historically low. The question is whether they will remain low as time goes on, and the United States recovers from the crippling impact of COVID.
At the Chernov Team we understand that knowledge is power and knowledge of the interplay between Fed Policy and mortgage rates is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.