After months of anticipation, the Federal Reserve increased short-term interest rates by a quarter of a percentage point.
Additionally, the Fed announced it forecasts a consensus funds rate of 1.9 percent by the end of the year, which means that each of its remaining meetings this year will involve a rate hike.
Experts have had mixed feelings on the news, with some calling the move “aggressive,” and others relieved and hopeful that the move will help the economy by lowering inflation.
While many experts anticipated the moves, it was unclear how many hikes would take place this year, and how high the rates would go.
Meanwhile, mortgage rates are rising again after a brief drop due to the Russian invasion of Ukraine and uncertainty around Federal Reserve policies, and experts anticipate purchase and refinance demand will quickly fall in response.
While demand briefly picked up again once rates fell below 4 percent, average 30-year fixed rates are now up to around 5 percent.
According to Joel Kan, an economist with the Mortgage Bankers Association, mortgage rate volatility was continuing due to the situation in Ukraine and anticipation surrounding the Fed’s first interest rate hike.
At the time, refinance applications had fallen 3 percent for the week, and were 49 percent lower than the same week the year prior.
Despite more borrowers having significant equity in their homes due to rising prices, experts say many will now choose to tap into this equity by taking out a second mortgage, rather than losing their current rate for a higher one.
Experts say supply is beginning to rise slowly, but not enough to meet the sustained level of demand that would help to level off buyer competition.
Mortgage applications still had risen 1 percent for the week, but were 8 percent lower than a year ago.
While the Fed funds rate doesn’t directly influence mortgage rates, other Fed policies do. For example, it affects the 10-year Treasury note. The Fed rate change will push up Treasury yields, which will push up mortgage rates.
It also will affect auto loan rates, credit card interest rates, and student loan interest rates.
Experts don’t think this first rate hike will result in a significant fall in home demand, but instead more of a slowdown.
Despite rising rates, those who are seeking to purchase or refinance may still be able to snag a great rate depending on their location and long-term goals.
Due to the significant equity available, there’s still opportunity for homeowners to push forward some of their home improvement goals to boost the value for future sales opportunities.