The beginning of February saw a raise of a key short-term interest rate to help bring down inflation. The one-quarter of a percentage point, from 4.5% to 4.75%, will hopefully lower the interest rates in the long term. Many professionals in the industry already considered the raise in the rates in January even though the rates fell this January from December’s 6.38% to January’s 6.29%.
The inflation rate can influence mortgage rates so when the inflation rate is falling so will the mortgage rate. The consumer price index that was reported in December showed that overall prices increased 6.5% over the previous 12 months. This shows that the Fed definitely has an upper hand on mortgage rates.
The Fed’s monetary policy committee will meet eight times a year and the last time they met last year all eight meetings saw an increase. During the summer and fall of 2022 there were four increases from the central bank and each increase was 0.75 percentage points.
“The Federal Reserve will continue to increase short-term rates to fight inflation, and will ultimately be successful, but it will be early 2024 before inflation reaches their 2% target,” says Michael Fratantoni, chief economist for the Mortgage Bankers Association.
If you are in the market for a HELOC, home equity lines of credit, these will go up. The quarter-point raise will cause the spike. It will be more expensive for a homeowner to borrow or repay the funds drawn. If you have a balance of $50,000, the monthly interest rate will rise by $10.42.