The Fed raised rates by a quarter point, bringing them above 5 percent for the first time in more than 15 years.
The Federal Reserve raised interest rates by a quarter-point on Wednesday, the 10th straight increase in an aggressive campaign to tame rapid inflation. However, they also opened the door to pausing rate increases as their policies combine with bank turmoil threaten to weigh down the economy.
Central bankers lifted rates to a range of 5 to 5.25 percent, a level they had not reached since the summer of 2007. The move represents the fastest series of rate increases since the 1980s.
But in their statement announcing the decision, policymakers also tempered language around future rate increases, saying that additional moves “may” be appropriate. Federal Reserve chairman, Jerome Powell, underscored in a news conference following the release that any additional changes would hinge on incoming economic data.
Those statements were a meaningful shift in the Fed’s stance. For months, officials had assumed that additional increases would be needed. Now, they could stop raising interest rates at any upcoming meeting — perhaps as soon as their gathering on June 13-14. Yet central bankers were careful to keep their options open at a hugely uncertain economic moment, suggesting that they could continue to raise rates if the economy and inflation prove hot.
“A decision on a pause was not made today,” Mr. Powell said at his news conference. “We’ll be driven by incoming data, meeting by meeting, and we’ll approach that question at the June meeting.”
What does this means for you as a potential homebuyer?
The Federal Reserve has been raising the federal funds rate, the rate banks charge one another for overnight loans. When the Fed does this, it sets off a ripple effect. Directly or indirectly, a number of borrowing costs for consumers go up, from consumer goods, to auto loans, to mortgages.
To offset this impact, many lenders offer products such as a 1-0, 2-1 and 3-2-1 buy-down, a feature that can lower your rate and payments for the next 12 to 36 months. Some consumers, alternatively or in conjunction, chose to increase their down-payment to create a lower loan amount and monthly payment. This option also creates a stronger equity position in their home should they ever wish to borrow against it in the future.
Regardless the mitigating measures you decide to take, the bottom line to it all is that you are, nevertheless. losing relative purchasing power – Financing the same home at greater cost. So know beforehand what you can afford at any given time. If you are in the market to buy a home, pre-qualify every three months with a lender so ensure you remain pre-qualified at the price point you were previously given. Make timely buying decisions and lock you interest rate in an uncertain market to ward off the effects of future prospective increases in the cost of money.
A good mortgage professional not only has the ability to find you the best interest rate, he/she is also able to provide you accurate market information to assist you in making the best mortgage-related decision at any given time. Reach out to a JESCOPR FUNDING professional for these types of answers today!
