Hello! This is Joe Harris with Morgan Financial and here is your “Joe Knows Mortgages MINUTE.” This week, we answer the question:
What does the Federal Reserve’s 75 basis-point rate increase mean for the housing market and consumers?
The idea behind the rate increase is that the Federal Reserve is trying to help consumers. By increasing the cost of borrowing money, the FED is hoping to decrease some demand, which will (hopefully) slow inflation, and in turn decrease prices! In short, as they increase the cost of borrowing money, you decrease the demand and prices drop with demand.
You may be thinking to yourself, “But now mortgage rates are so high!” When you compare current rates to the record-low rates we saw during the height of the COVID-19 pandemic, there’s no denying current rates are higher. Individuals who bought a home in 2020 at, let’s say a 2-3% interest rate and locked it in for a 30-year fixed rate are undoubtedly in a great spot.
However, when you take a look at the average interest rates over the years for a 30-year fixed-rate mortgage, rates are actually historically low. In 1981, the average interest rate for a 30-year fixed-rate mortgage was 16.63%! In 2018, the average rate for a 30-year fixed-rate mortgage sat at 4.54%, which isn’t too far off from the rates we’re seeing today.
Like most industries, the housing market will have it’s ups and downs and we’ll see rates fluctuate as time goes on. If you’re wondering when the best time to buy a house is, the best time is always when you’re ready and qualified. Trying to time the market may end up costing you more in the long-run than just buying when you’re ready, and refinancing when the opportunity for a lower rate crosses your path.
Everyone’s situation differs depending on your individual qualifications and mortgage needs, as well as loan program, so contact us today to get started on your home loan with our team of mortgage experts you can trust.