Fed keeps mortgage rates unchanged to start the year
In a move that most market analysts expected, the Federal Reserve announced a pause in rate changes to start the year. This pause comes after three consecutive cuts to the federal funds rates after the last three meetings. The federal funds rate will stay at the range of 4.25%-to-4.5%.
The Fed also gave warnings about inflationary risks as a key aspect of its thought process behind the pause.
In a press release issued by the Fed, the statement ‘has made progress toward’ the Fed’s 2% inflation goal was replaced. The statement now reads, “The unemployment rate has stabilized at a low level in recent months and labor market conditions remain solid. Inflation remains somewhat elevated.”
What does this mean?
The announcement from The Fed means that the cost to borrow money will stay the same as it’s been since the last FOMC meeting.
The initial market reactions were mixed. The bond market started off mostly unchanged while stocks dipped shortly after the announcement. UMBS prices remained mostly stable and the yield on the 10-year note increased slightly.
How does this impact homeownership?
The Fed’s decisions on interest rates can have an effect on almost every aspect of the economy. The last time the Fed cut interest rates, mortgage rates rose, so the two aren’t directly related. However, interest rates do impact the bond market, which does influence mortgage rates.
There are a few scenarios that could be in play:
First, if investors believe The Fed has done enough for inflation, they could rush into the bond market and drive rates lower.
There’s also the possibility that a strong economy could lead to inflation coming back into focus. That has the potential to push rates higher.
Based on the comments from the Fed, inflation is still an area of concern, but economic strength helped the Fed decide to keep rates unchanged.
There are also several other factors that may impact the housing market and mortgage rates.
The bottom line is, if you need to buy a home, you should buy a home. If you can afford to wait, you may want to wait.
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.
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