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The Impact of Inflation on Mortgage Rates
Dated: May 10 2023
Views: 71
You might come across information about the recent Federal Reserve (the Fed) decision if you read headlines about inflation or mortgage rates. But what does it mean for you, the real estate market, and your home buying aspirations? What you should know is as follows.
Inflation and the Housing Market
The latest data indicates that, despite the Fed's best efforts to reduce inflation, the rate is still higher than the target (2%), despite some improvement. That was a factor in the Fed's last week decision to increase the federal funds rate. As stated by Bankrate:
"The Federal Reserve has raised interest rates for the tenth time in ten meetings, continuing its streak of defying inflation. ..The increases were made in an effort to cool an economy that had exploded after emerging from the 2020 coronavirus recession. "
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
Your regular expenses increase when inflation is high. This means that you have probably experienced a pinch at the gas station and the grocery store. The Fed is actively attempting to reduce inflation by increasing the Federal Funds Rate. If the Fed is successful, it might ultimately result in lower mortgage rates and better affordability for you when buying a home. This is because mortgage rates are frequently high during periods of high inflation. However, experts predict that mortgage rates will likely decrease as inflation slows.
Where Experts Think Mortgage Rates and Inflation Will Go from Here
The housing market will continue to be impacted going forward by both inflation and mortgage rates. Also, as Chief Economist Lawrence Yun of the National Association of Realtors (NAR) puts it:
“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 (MBA), 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 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. To stay informed on the latest insights, connect with a trusted real estate advisor. 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. Lean on a trusted real estate professional so you have expert insights on housing market changes and what they mean for you.
Credits to: Keeping Current Matters
Danielle Sharp
Full time REALTOR since 2002, I moved from the Detroit area to SWFL in 2007. Since 2011 I have been the broker/owner of Sharp Homes Realty, a small boutique brokerage based out of Cape Coral. We are f....
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