You don’t want to change the TV channel when the Federal Reserve decides to raise or lower rates. As of July 2022, the Federal Reserve has raised interest rates three times this year. The economic shutdown due to the pandemic had kept rates near zero before the Feds increased rates starting in March, the first hike in more than three years. Further hikes are expected at committee meetings scheduled in September, November, and December.
WHY DID THE FEDS DO THIS?
The Feds are raising interest rates to slow down inflation, making this recent set of interest rate increases since 1994. It seems the Federal Reserve aims to do whatever it can to tame price hikes and bring down the cost of gas and food.
HOW DOES THIS AFFECT ME?
A higher fed funds rate means more expensive borrowing costs, which can reduce demand to borrow money. The banks and other financial institutions pass on these higher borrowing costs by raising the rates they charge for consumer loans.
When the economy is strong, interest rates tend to rise along with growth. Higher interest rates mean higher mortgage loan costs. Rising rates make homes more expensive for buyers, thereby reducing the demand for home purchases.
THE BOTTOM LINE
Home prices, as of August 2022, don’t seem to be going down due to a shortage of properties for sale. There is still hope for buyers, though. There are first-time home buyer programs or if you’re a Veteran you can get a loan that doesn’t require a down payment.
If you have any questions about how the lower interest rate affects you feel free to reach out to a mortgage lender.
