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As a prospective homebuyer, it’s important to stay up-to-date with news about inflation and mortgage rates. Recent headlines have been buzzing about the Federal Reserve’s (the Fed) decision and its impact on the housing market. So, what does it all mean for you and your plans to buy a home? Let’s dive into the details.

The Connection Between Inflation and the Housing Market

The Fed has been working hard to lower inflation, but recent data shows that the inflation rate is still higher than the target of 2%. This played a role in the Fed’s decision to raise the Federal Funds Rate last week, with the goal of cooling down an economy that was rebounding from the coronavirus recession of 2020. While the Fed’s actions don’t directly dictate what happens with mortgage rates, their decisions have an impact and contributed to the intentional cooldown in the housing market last year.

How This Impacts You

High inflation means your everyday expenses go up, from gas prices to grocery bills. By raising the Federal Funds Rate, the Fed is actively trying to lower inflation. If the Fed is successful, it could ultimately lead to lower mortgage rates and better homebuying affordability for you. This is because mortgage rates tend to be high when inflation is high, but as inflation cools, experts predict that mortgage rates will fall.

Where Experts Think Mortgage Rates and Inflation Will Go from Here

Moving forward, both inflation and mortgage rates will continue to impact the housing market. According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), mortgage rates are likely to descend lower later in the year as consumer price inflation calms down. Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), agrees that mortgage rates will likely 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 that they will trend down this year if inflation comes down too.

What You Should Do Now

It’s important not to let the latest decision from the Fed confuse you. Where mortgage rates go from here depends on what happens with inflation. To stay informed on the latest insights, it’s essential to connect with a trusted real estate advisor. They keep their pulse on what’s happening in the market today and help you understand what the experts are projecting and how it could impact your homeownership plans.

In conclusion, high inflation can have a significant impact on mortgage rates and the housing market. By raising the Federal Funds Rate, the Fed is taking active steps to lower inflation, which could ultimately lead to lower mortgage rates and better homebuying affordability for you. Stay informed by connecting with a trusted real estate professional who can provide you with expert insights on housing market changes and what they mean for you.

*info provided by Keeping Current Matters