This forecast is based on expectations of an increase in inflation as the economy continues to recover from the impacts of the COVID-19 pandemic.
The current mortgage rate environment is a result of the current low-interest rate environment, which has been created by the Federal Reserve’s efforts to keep rates low in order to stimulate the economy. While the pandemic led to a slowdown in the economy this past year, the latter stages of 2020 and into 2021 have seen an increase in activity as more people return to work and consumer spending takes off.
The March meeting was an important one for the Federal Reserve, as it was the first under new chair Jerome Powell. Powell has already indicated his willingness to take a more aggressive stance when it comes to setting policy and taking action in order to further support the recovery of the economy. The meeting saw the Fed leave interest rates unchanged but adjust the asset purchases program to provide additional liquidity to the markets.
Based on the consensus of market analysts, the expectation is for mortgage rates to increase slightly following the Fed meeting. This reflect the overall economic outlook, as increased consumer spending along with a further expected increase in employment will lead to an increase in inflation. When inflation rises, mortgage rates typically follow suit.
The expected increase in mortgage rates does not mean homebuyers should wait to purchase a home. Instead, homebuyers should look for a competitive rate and compare lenders. Homebuyers should also factor in items such as points, origination fees and closing costs into their calculations. Additionally, buyers should look at other factors, such as loan terms, payment flexibility and prepayment penalties, to ensure they are getting the best deal possible.
The Federal Reserve’s March meeting was a pivotal moment for the future of the economy. While the Fed left interest rates unchanged, the move to ramp up asset purchases to provide additional liquidity to the markets serves as a signal of the Fed’s commitment to aid the recovery. This, along with an improving labor market and increased consumer spending, will likely result in modest increases to mortgage rates in the near term. Homebuyers must remain vigilant and compare lenders to ensure they get the best deal possible. With preparations and research, buyers can find competitive mortgage rates despite rising market conditions.
This article was contributed on Nov 04, 2023