The Federal Reserve (Fed) has a dual mandate: stable prices and maximum employment. When prices rise too quickly, the Fed raises interest rates, which can impact mortgage rates and housing affordability.
2024 Fed Rate Predictions
The Fed recently lowered the federal funds rate target to 4.75%–5%, with projections suggesting modest rate cuts may continue. However, officials differ on future cuts, with some urging caution depending on economic data.
What Is a Fed Rate Hike?
A rate hike increases borrowing costs for banks, which raises interest rates on loans, including mortgages. Higher borrowing costs reduce spending, cooling inflation by lowering demand.
How Do Fed Rates Affect Buyers?
While mortgage rates aren’t directly tied to the federal funds rate, they typically follow its trend. Higher rates decrease purchasing power, often pushing buyers to lower budgets or potentially lower home prices.
How Do Fed Rates Affect Sellers?
Low rates generally attract more buyers, boosting prices. If rates rise, sellers may face fewer buyers and may need to price homes more competitively.
Recent Fed Rate Hikes
The Fed raised rates four times in 2023, reaching a target range of 5.25%–5.5% by July. This followed a series of increases aimed at controlling inflation after near-zero rates in 2022.
The Bottom Line
Rates are currently falling, but understanding past Fed actions can prepare you for future changes. If you’re ready to buy, take advantage of today’s rates with V Nation Corp®.
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