The Fed Raised Rates...again

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The Fed has once again hiked the Fed funds rate, this time with a .25 hike announced today.  This brings the Fed rate to 5.5%, the highest level in 22 years, signaling tighter credit, more expensive borrowing, and more pressure on banking profitability as the Fed continues to wage war on inflation.

The Fed rate hike is a move to increase the Fed funds rate - that is, the rate at which banks borrow from the Fed and each other - and not the rate borrowers/consumers pay.  When the Fed raises their rate, it's a move designed to curb inflation by restricting the movement of money and borrowing.  The move has a direct impact on financial vehicles tied to the 'Prime' rate - so your financial vehicles with an interest rate of "prime +/-" (think credit cards, home equity lines of credit) will see an immediate impact, moving in the same direction and same amount as the Fed funds rate.

Mortgage rates, on the other hand, tend to move in opposition of the Fed moves.  This is because the Fed rate hikes tend to bring down inflation, and mortgage rates tend to move in the same direction of inflation (which is why we have the high mortgage rates we see today; a direct result of inflation spikes and heightened inflation over the past 18 months).   As the Fed fights to bring inflation down, their fight should result in lower mortgage rates, too...eventually.

In the current market, mortgage rates remain stubbornly high because inflation remains stubbornly high, and despite some cracks appearing in the surface of the economy, jobs numbers have been solid and some areas of the economy have continued to see high levels of inflation (have you been to the grocery store recently??).  There are also large scale sales of mortgage backed securities (MBS) as banks struggle to raise capital (to meet capital requirements placed on them, banks will sell assets, with some of those assets today being mortgage backed securities) - the increase of MBS in supply puts downward pressure on pricing for MBS, resulting in higher rates.


The .25 change to the Fed funds rate today was expected, so market impact and reaction was minimal.  There are 2 sets of inflation and employment reports between now and the next Fed meeting in late September, and those numbers will likely indicate whether the Fed will continue to hike rates or whether they'll begin to ease up on monetary policy.


This content is a synopsis of commentary found at

Posted by

John Meussner
NMLS ID #138061

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Comments (21)

Dr. Paula McDonald
Beam & Branch Realty - Granbury, TX
Granbury, TX 936-203-0279

Thank you for keeping us updated. It's an always-changing market.

Jul 26, 2023 05:49 PM
John Meussner

Thank you, Paula, appreciate your comment and taking the time to stop by and read : )

Jul 26, 2023 06:16 PM
Mimi Foster
Falcon Property Company - Colorado Springs, CO
Voted Colorado Springs Best Realtor

Thank you for the excellent explanation, John. Seems so unnecessary to me, but what do I know?

Jul 26, 2023 06:56 PM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I think that the rates are going to be with us and we should adopt ourselves to the art of it all..

Jul 26, 2023 09:36 PM
Charles Ross - eXp Realty LLC
eXp Realty LLC Salina Group - Salina, KS
Love To Help People

Excellent post.Thank you for sharing. Have a wonderful day and a blessed week

Jul 27, 2023 03:27 AM
Leanne Smith
Dirt Road Real Estate - Golden Valley, AZ
Relocation to NW AZ with elbow room & more freedom

The market is always changing and yes the rate increase was expected. Unfortunately, the other end of the equation government spending is not being addressed. US debt continues to grow.

Jul 27, 2023 04:51 AM
Kat Palmiotti
406-270-3667,, Broker/REALTOR® - Kalispell, MT
Helping your Montana dreams take root

Thank you for the excellent explanation. The rates, and the impact, is often misunderstood.

Jul 27, 2023 04:55 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning John,

Thank you for the explanation in an easy to understand analysis. It is a changing market but as Leanne Smith stated:  "Unfortunately, the other end of the equation government spending is not being addressed. US debt continues to grow." This is one of my biggest concerns.

Jul 27, 2023 05:28 AM
Leanne Smith

We who are older understand the impact of the national debt with regards to inflation. 

Jul 27, 2023 05:56 AM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Good morning, John... I will certainly be watching the markets very carefully in coming weeks and months. All I know is that for now, sellers who don't have to move will be less incentivized to list their homes if they have a good interest rate on their mortgage.

Jul 27, 2023 06:02 AM
John Meussner

we're seeing that as a major issue right now, but the silver lining is that as rates come down, inventory should tick up some to help balance the added buyer demand....we hope!

Jul 27, 2023 02:37 PM
Peter Mohylsky, Beach Expert
PMI. Destin - Miramar Beach, FL
Call me at 850-517-7098

Great post and I would not suggest waiting on those improvements.  inflation of prices and labor need to be factored in because no one knows where they will be by years end.  

Jul 27, 2023 06:16 AM
John Meussner

it is all somewhat of a guessing game!

Jul 27, 2023 02:38 PM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi John:

Thanks for a thoughtful explanation and analysis on the rate change and what it means. No doubt many are waiting/hoping for rates to become more favorable.


Jul 27, 2023 10:07 AM
John Meussner

Thanks Jeff, forecasts are for the 5's by year's end - we'll see!  These 7's are hanging around much longer than most people would like

Jul 27, 2023 02:38 PM
Don Baker
Lane Realty - Eatonton, GA
Lake Sinclair Specialist

Well I hope I can expect to see that same rate hike on my stock brokerage savings account (which is very close to 5%) because we have more money in savings than we owe right now, but with with our interest rate on our mortgage and cars well below what we're making on our money it doesn't make sense to pay it off.

Jul 27, 2023 12:07 PM
John Meussner

That has been a silver lining for sure - with all the economic craziness, short term investments are paying pretty nicely - not often you can get a 3 month CD with a similar rate of return as a 12 month!

Jul 27, 2023 02:39 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

John in my opinion all the moves the Fed's have made have not achieved what they were trying to do, in fact they might have made it worse.

Jul 27, 2023 02:17 PM
John Meussner

They've certainly mucked things up with their misdiagnosis and political games (that's the only thing I can chalk up their 'transitory' commentary to).

Jul 27, 2023 02:39 PM
Paddy Deighan MBA JD PhD - Vail, CO
Paddy Deighan J.D. Ph.D

Hard to imagine but they did it again …. It isn’t working 

Jul 27, 2023 06:53 PM
John Meussner

Starting to work - but while it's working, they may cause a banking crisis and a recession that'll cause them to need to reduce rates again quickly

Jul 28, 2023 11:09 AM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

A little over a year ago , we pushed a tenant who had an option to buy , to get off the pot and Settle on the Property . He wasn’t happy about this , but he got himself a 3% mortgage and settled. I text him every time rates go up  

Jul 28, 2023 03:54 AM
John Meussner

HAHA the rates, and I'm sure that property value, are both up!  That was some friendly pushing : )

Jul 28, 2023 11:08 AM
Sheri Sperry - MCNE®
Coldwell Banker Realty - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi John.

Thank you for the explanation.  I will pay more attention to the mortgage and inflation rates to see how they move. 

Jul 28, 2023 08:36 AM
John Meussner

As inflation comes down, rates will follow : )  Of course, this also increases the likelihood of recession which poses it's own issues

Jul 28, 2023 11:08 AM
Mark Don McInnes, Sandpoint-Idaho
Sandpoint Realty LLC - Sandpoint, ID
North Idaho Real Estate - 208-255.6227

John, than you as always for your clear concise synopsis of the market and surrounding factors.  I would have to say a key statement in your post being "eventually".  Make it a great weekend. Be safe, stay healthy.  mdm

Jul 28, 2023 11:40 AM
John Meussner

Appreciate it, Mark!

Jul 28, 2023 04:20 PM
Margaret Goss
@Properties - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

Your comment about groceries still being sold at high inflation prices - any idea why? It's definitely one of the things that sticks out!

Jul 28, 2023 03:16 PM
John Meussner

Inflation has cooled but is still high for certain materials and things - but I'd guess more realistically, businesses will be slow to bring prices down until/unless demand drops.  If people will pay higher prices, why not charge them?  (I don't think that's right for things like food, but that's capitalism)

Jul 28, 2023 04:20 PM
Elyse Berman, PA
LoKation Real Estate - Boca Raton, FL
Boca Raton FL (561) 716-7824

Thank you for breaking this down in easy-to-understand terms.  The grocery store is totally ridiculous!

Aug 04, 2023 11:57 AM
John Meussner

AMEN --- I dread walking to the register every trip!  

Aug 04, 2023 05:38 PM
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

A little late to this party ... but enjoyed reading your post and appreciate the information.  Rates are definitely a subject of conversation these days and although higher than years past, not as high as when I bought my first home.  I bought my house using an FHA load - ARM (Adjustable Rate Mortgage) -- started at 9-3/4% and ended up at 17% -- now that was a shocking experience!  But!  I worked hard, made my payments on time and in time, the payments became actually easier to make and my payment was less than my friends who who were still stuck in the RENT rat-race.

Aug 08, 2023 03:51 PM
John Meussner

Hi Diana - -thank you for sharing your experience!  Many others have been through similar experiences, and while no one likes a high rate, they ebb and flow with economic fortunes --- long term, people that get in and buy are almost always better off : )

Aug 09, 2023 06:55 PM
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Thank you for the explanation - this is one to share with our clients because you lay it out so clearly

Aug 10, 2023 08:28 PM