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The Impact of Inflation on Mortgage Rates

By
Real Estate Agent with HomeSmart 0561240

The Impact of Inflation on Mortgage Rates

If you're reading headlines about inflation or mortgage rates, you may see something about the recent decision from the Federal Reserve (the Fed). But what does it mean for you, the housing market, and your plans to buy a home? Here's what you need to know.

Inflation and the Housing Market

While the Feds working hard to lower inflation, the latest data shows that, while the number has improved some, the inflation rate is still higher than the target (2%). That played a role in the Fed's decision to raise the Federal Funds Rate last week. As Bankrate explains:

 

Keeping its inflation-fighting streak alive, the Federal Reserve has raised interest rates for the 10th time in 10 meetings . . . The hikes aimed to cool an economy that was on fire after rebounding from the coronavirus recession of 2020. 

While the Feds actions don't directly dictate what happens with mortgage rates, their decisions do have an impact and contributed to the intentional cooldown in the housing market last year. 

How This Impacts You 

During times of high inflation, your everyday expenses go up. That means youve likely felt the pinch at the gas pump and in the grocery store. By raising the Federal Funds Rate, the Fed is actively trying to lower inflation. If the Fed is successful, it could also ultimately lead to lower mortgage rates and better homebuying affordability for you. Thats because when inflation is high, mortgage rates tend to be high. But, as inflation cools, experts say mortgage rates will likely fall.

Where Experts Think Mortgage Rates and Inflation Will Go from Here

Moving forward, both inflation and mortgage rates will continue to impact the housing market. And as Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

 

Mortgage rates are likely to descend lower later in the year as the consumer price inflation calms down . . . 

Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), explains

 

We continue to expect that mortgage rates will drift down over the course of the year as the economy slows . . .

While there's no way to say with certainty where mortgage rates will go from here, the experts think mortgage rates will trend down this year if inflation comes down too. To stay informed on the latest insights, connect with a trusted real estate advisor. They keep their pulse on what's happening today and help you understand what the experts are projecting and how it could impact your homeownership plans.

Bottom Line

Dont let headlines about the latest decision from the Fed confuse you. Where mortgage rates go from here depends on what happens with inflation. If inflation cools, mortgage rates should tick down as a result. Lean on a trusted real estate professional so you have expert insights on housing market changes and what they mean for you.

 

 

 

 

 

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“YOUR Rock-Solid Choice Realtor for Making Home Sellers a Profit & Home Buyers Equity”

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Comments (9)

Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I see it. I do and I do think it’s better to control what you can control and worry about solutions. I try to remind myself of that.

May 16, 2023 06:30 AM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Shayne, still many buyers stating the rates are just too high for them right now, and renewed a lease.

May 16, 2023 11:18 AM
Bob "RealMan" Timm
Ward County Notary Services - Minot, ND
Owner of Ward Co Notary Services retired RE Broker

I did not know anything about interest rates when I bought my first home in the 70's when they were the highest in US history. I just knew I could make the payments... barely so I went ahead and bought Shayne Stone . I would do the same today if need be.

May 16, 2023 12:06 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Shayne Stone until this administration gets inflation under control rates will keep on inching up. 

May 16, 2023 01:36 PM
Hannah Williams
HomeStarr Realty - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-820-3376

Shayne Stone  For many people it really cuts buying power. For those who need to move, they will buy.  There is still a shortage of homes for sale 

May 16, 2023 06:36 PM
Kimo Jarrett
Cyber Properties - Huntington Beach, CA
Pro Lifestyle Solutions

It depends on your cash flow and ability to maintain it regardless of the economy. Inflation is great for appreciation of equity, so, if you can purchase real estate today, and your factors are reasonable, then buy today and reap the benefits of ownership.. 

May 16, 2023 11:40 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Great information Shayne.  It's important for buyers and sellers to have good data to make good decisions.  Your blog is hugely helpful for that!

May 20, 2023 09:16 AM
Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Great post!  Thanks for sharing and enjoy your day!

May 23, 2023 07:12 AM
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

This is a subject of discussion everywhere I go these days.  Great Post Shayne Stone 

May 30, 2023 05:30 PM