The Fed Raised Rates Today. Here’s What It Actually Means for Homebuyers.

The Full Story Is Much More Important.

If you’ve seen today’s headlines, you’ve likely heard that the Federal Reserve raised its key short-term interest rate by 0.25%, moving the target range from 3.50%-3.75% to 3.75%-4.00%.

Whenever the Fed makes a move like this, one of the biggest misconceptions I hear is:

“Mortgage rates just went up by 0.25% too.”

The reality is, that’s not how mortgage rates work.

Mortgage rates are not directly tied to the Federal Funds Rate. Instead, they’re influenced primarily by the bond market, including mortgage-backed securities and longer-term Treasury yields.

Although today’s rate hike was widely expected and much of the market had already priced in the Fed’s decision, investors paid close attention to Fed Chairman Kevin Warsh’s comments during his press conference. As Warsh emphasized that inflation remains “too high” and signaled the Fed remains committed to bringing it under control, Treasury yields moved higher, with the 10-year Treasury climbing back toward the 5% level. While mortgage rates don’t move in lockstep with Treasury yields, they often follow the same general direction. Investors interpreted the Fed’s message as a sign that inflation pressures may persist and that interest rates could remain elevated for longer than previously expected. As a result, bond prices fell and yields rose, creating additional upward pressure on mortgage rates.

The Key Takeaway

Mortgage rates are often influenced less by what the Fed does today and more by what investors believe the Fed will do tomorrow.

Over the past several days, mortgage rates had already been moving higher in anticipation of today’s decision and ongoing concerns about inflation. Much of the market reaction occurred before the Fed’s announcement was made, but the Fed’s comments reinforced concerns that inflation may take longer to bring under control than many investors had hoped.

Currently, national average 30-year fixed mortgage rates are hovering around 7%, and we expect mortgage rates to remain generally in the high-6% to low-7% range in the near term.

Don’t Let the Interest Rate Alone Determine Whether It’s the Right Time to Buy

Too many people focus exclusively on the rate and lose sight of the bigger picture.

Every buyer’s situation is unique, and today’s market presents opportunities that many people overlook. The right financing strategy can often make a much bigger impact than a quarter-point movement in interest rates.

There are a variety of tools available to help buyers achieve their goals, including:

• Seller-paid closing costs
• Interest rate buydowns
• Temporary and permanent rate reduction strategies
• Specialized loan programs

The Better Question to Ask

The question isn’t always:

“What’s the rate?”

The better question is:

“What’s the Right Strategy for My Situation?”

A smart homebuying decision isn’t based on a headline. It’s based on understanding your goals, your timeline, your budget, and the options available to you.

Whether you’re thinking about buying your first home, moving up, downsizing, or simply exploring your options, having a plan matters far more than trying to perfectly time the market.

I’ve said this many times before, and I believe it now more than ever:

The buyers who win in this market aren’t necessarily waiting for the perfect rate. They’re working a plan and taking advantage of the opportunities available today.

The reality is that today’s market offers opportunities that weren’t available during the frenzy of a few years ago. Buyers often have more negotiating power, more inventory to choose from, and more opportunities to structure financing in ways that help meet their long-term goals.

Let’s Talk About Your Options

If you’re considering buying or selling, or if you’re simply trying to understand what today’s market means for you, let’s have a conversation.

We’ll review your goals, discuss the financing options available, and help you determine the best path forward.

The market will continue to change. Rates will move. Headlines will come and go.

But a well-designed strategy can help you move forward with confidence regardless of what the market is doing.

Best Regards,

Chris Shumate
The Shumate Mortgage Team
Fairway Home Mortgage

“Helping buyers navigate the market with a plan, not just a rate.”