February 2, 2023

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Federal Reserve Chair Jerome Powell sent a strong message at his press conference last week: “We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses.”
Mortgage rates shot up late last week after the Fed chose to enact another 75-basis-point hike to the federal funds rate. Powell reiterated the Fed’s commitment to slowing inflation, even if it means higher unemployment.
Mortgage rates have increased again today and aren’t likely to drop any time soon. Though mortgages aren’t directly impacted by Fed hikes, investor expectations surrounding how those hikes might impact the economy can push mortgage rates up or down.
“The high rate of inflation has been a major catalyst for higher rates, and the previous Fed rate hikes have done little to moderate inflation and have caused rates to go up,” says Melissa Cohn, regional vice president of William Raveis Mortgage. “In addition, the Fed’s super hawkish comments on future rate hikes and the need to continue hiking faster than believed earlier this year have sent bond yields high much faster and more than expected.”
Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.
By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.
Mortgage rates started ticking up from historic lows in the second half of 2021 and have increased significantly so far in 2022.
In the last 12 months, the Consumer Price Index rose by 8.3%. The Federal Reserve has been working to get inflation under control, and plans to increase the federal funds target rate two more times this year, following increases at its last five meetings.
Though not directly tied to the federal funds rate, mortgage rates are sometimes pushed up as a result of Fed rate hikes and investor expectations of how those hikes will impact the economy.
Inflation remains elevated, but has started to slow, which is a good sign for mortgage rates and the broader economy.
When mortgage rates go up, home shoppers’ buying power decreases, as more of their anticipated housing budget has to go toward paying interest. If rates get high enough, buyers can get priced out of the market completely, which cools demand and puts downward pressure on home price growth.
However, that doesn’t mean home prices will fall — in fact, they’re expected to rise even more this year, just at a slower pace than what we’ve seen in the past couple of years.
Even with fewer buyers in the market, those who can afford to buy will still be competing over historically low inventory. When there are more buyers than there are houses available, home prices go up. So while conditions may loosen up a bit due to high rates, we aren’t likely to see a significant drop in prices.
It can be hard to know if a lender is offering you a good rate, which is why it’s so important to get preapproved with multiple mortgage lenders and compare each offer. Apply for preapproval with at least two or three lenders.
Your rate isn’t the only thing that matters. Be sure to compare both what your monthly costs would be as well as your upfront costs, including any lender fees.
Even though mortgage rates are heavily influenced by economic factors that are out of your control, there are some things you can do to help ensure you get a good rate:

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