With the Federal Reserve announcing another rate hike last week, we are watching to see what this will mean for mortgage rates and the housing market in general. The good news, it appears this may be the last hike according to several articles we found online. Okay, no one can guarantee what the Fed will and will not do, however, we can take solace in the fact that the increases over the past year seem to be doing what is intended. What’s that?
The main purpose of these rate hikes, according to the recent Bankrate.com article “What the Fed’s May rate hike means for homebuyers and sellers,” is to calm inflation. The Bankrate.com article goes on to point out that the housing market tends to be resilient in general. This is because mortgage rates often have no bearing on the life events that lead to a move.
I found this information given in the article very telling of this point. The article notes, “History bears this out. In the 1980s, mortgage rates soared as high as 18 percent, yet Americans still bought homes. In the 1990s, rates of 8 percent to 9 percent were common, and Americans continued snapping up homes. During the housing bubble of 2004 to 2007, mortgage rates were higher than they are today — and prices soared.” (Ostrowski and Petry)
Mary Marengi of Academy Mortgage also shared her thoughts on this topic in a recent post titled, “Homebuyers want to know: Why a 3rd Fed hike?” In this post, she also points to the fact that a Fed rate hike has no direct bearing on mortgage rates. Rather, she notes how it could be a good thing, saying, “…the Federal Reserve’s efforts to calm inflation may be welcome news to you. Mortgage rates typically rise in times of inflation. If inflation cools, mortgage rates are likely to follow suit.” (Marengi)
So, if you are thinking of buying, know there’s a light at the end of the tunnel. If you do buy now while rates are high, you will always have the opportunity to refinance when rates come down. In Marengi’s post, she also notes these key points regarding buying a home:
- Homeownership is historically considered a reliable hedge against inflation.
- Home price growth is moderating.
- Homeownership can still help you build prosperity. (Marengi)
In the end, do your homework. Read these articles, talk with a lender and even a local realtor to get a sense of the market in the area you plan to buy. After doing the due diligence, only then can you make the best decision for your next move.
Marengi, Mary. “Homebuyers want to know: Why a 3rd Fed hike?” Academy Mortgage Corporation. 3 May 2323, https://academymortgage.com/learning-center/fed-rate-hike?lo=Mary-Marengi. Accessed 9 May 2023.
Ostrowski , Jeff, (Edited by:Michele Petry). “What the Fed’S May Rate Hike Means for Homebuyers and Sellers.” Bankrate.Com, 3 May 2323, www.bankrate.com/real-estate/how-fed-rate-hike-affects-housing/. Accessed 9 May 2023.