Just to dispatch with the technicalities, the Federal Reserve does not set mortgage rates, and the central bank’s decisions don’t drive mortgage rates as directly as they do other products, like savings accounts and CD rates.
But the Fed’s actions do indirectly influence the rates consumers pay on their fixed-rate home loans when they refinance or take out a new mortgage. The Fed at its September meeting indicated it plans to keep rates low at least until 2022, despite a brightening economic picture and a jump in inflation in recent months.
“The Fed is inching closer to tapering, the process of slowly – very slowly – dialing back their bond purchases,” says Greg McBride, CFA, Bankrate chief financial analyst. “The stock market has been a direct beneficiary of the Fed’s stimulative actions and the prospect of reducing that is sure to spark heightened market volatility.”