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HOW DOES FED INTEREST RATE INCREASE TODAY AFFECT MORTGAGE RATE?

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The Federal Reserve announced another three-quarter-point hike on July 27. It was intended to cool the economy, which amongst others, a red-hot housing market characterized by escalating home prices and low inventory.

Note that the Fed does not set mortgage rates. Fed rate is a short term rate that has more direct affect on products like savings account and CDs. Mortgage rates on the other hand move in lockstep with 10-year Treasury yields. As you can see from the photos, mortgage rates are determined by many factors. The central bank’s decision set the overall tone for mortgage rates only.

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In the short run, when the mortgage rates are higher, Buyers will have to cope with a higher monthly mortgage payment and Sellers can experience less offers for their homes. Overall, we expect home prices to appreciate, but at a normal pace:

Sam Khater, chief economist at mortgage giant Freddie Mac: “While home purchase demand has moderated, it remains competitive due to low existing inventory”

Lawrence Yun, NAR’s chief economist: “I expect the pace of price appreciation to slow as demand cools and as supply improves somewhat due to more home construction,”

If you are considering selling or buying, partner with a reputable, experienced local agent to guide you through the process. In Palos Verdes and South Bay, contact Stephen Haw at (310) 503-9886 to get the most out of your transaction. DRE#00808646. Keller Williams Palos Verdes Realty

Call 310.503.9886 or email skh8828(at)gmail(dotted)com for professional guidance from The Stephen Haw Group, your local experts with international connections.