Fed Raises Their Lending Rate – Mortgage Rates Improve. Yes! You read that right. Why is that you ask? Simply put, what the Fed does with their lending rate (Prime Rate) does NOT directly affect mortgage rates. Mortgage rates move differently. As expected, the Fed raised policy rates by 0.25% at their February meeting. This is the smallest increase of the eight made in the last 11 months. Pricing for mortgage rates improved as a result.

More “interesting” is the Fed’s signal regarding future increases.

The Fed statement released after the meeting hinted that ongoing rate increases are anticipated before inflation is brought to the Fed’s target of 2.0%. Investors were hoping the Fed would back off of that sentiment. Here’s a link to the AP article yesterday for more details  https://apnews.com/article/federal-reserve-powell-comments-682b416097d60a09c7072b6afe734478

Back to mortgage rates:
Mortgage rates are impacted by market forces beyond Fed actions and will not necessarily change at the same pace as the Fed’s moves. They often shift before the Fed acts, in anticipation of their changes.

Background on the Fed:
The Federal Reserve Board (the Fed) controls the federal funds rate and discount rate, which are charges for overnight loans from bank to bank or from the Fed to member banks. The rate was lowered to near zero in March 2020 in response to the pandemic. These historic measures are now being reversed. This is the eighth increase since March 2022.

Don’t let interest rates hold you or your clients back from making a move. We have options to insulate you if rates go up AFTER you purchase a home. We’re still closing loans every day and less than 30 days on average. It’s a great time to buy!

Check out the video below that talks about this and contact me with any questions!

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