Fed announces interest rate hike in September, but how will that affect mortgage rates?
The Federal Reserve voted to raise interest rates at its meeting which concluded Wednesday, September 16.
This was Chairman Kevin Warsh’s third meeting leading the nation’s central bank . Though he has said he favors lowering rates, the Fed board that includes Warsh voted 12 to 0 to increase interest rates.
This is the Fed’s first interest rate hike since July 2023 with many officials predicting another hike before the end of the year. The federal funds rate will go to the 3.75% - 4% range.
The Federal Open Market Committee, which votes as a body on raising or lowering rates, is expected to meet again on October 27-28. This will be the seventh of eight meetings this year.
President Donald Trump nominated Warsh in March to replace outgoing Chairman Jerome Powell, who remains on the board as one of 12 voting governors. This September meeting was Warsh’s third as Chairman.
What does this mean for home loans?
The announcement from the Fed means that the cost to borrow money, including for mortgages, could rise. Mortgage rates have risen by around half a percent in the month leading to the September meeting.
Most experts are currently expecting rates to rise again before the end of the year.
How does this affect homeownership?
The Fed’s decisions on interest rates can influence almost every aspect of the economy. After the Fed cut interest rates in December, mortgage rates saw a drop. And interest rates do affect the bond market, which can influence mortgage rates.
The bottom line is, if you need to buy a home, you should buy a home. No one knows for certain when the Fed will cut interest rates or when mortgage rates could drop. With many experts believing that the Fed will increase interest rates again before the end of the year, mortgage rates may rise in response . If rates drop after you purchase your home, you could always refinance to match lower rates.
The team at Rate is here to help you navigate a tricky housing market. If you have questions, we have team members available to support you. Also, if you know you need to start the homebuying process, we can assist you in getting a mortgage pre-approval.
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.
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