Source: Time —
The Federal Reserve once again hiked its benchmark interest rate this week, a fourth consecutive increase of 75 basis points.
What does that mean for mortgage rates, which are already above 7% for the first time in 20 years?
Maybe not much.
“What’s tricky about watching what the Federal Reserve is doing is that it doesn’t always directly translate into a one-to-one change in mortgage rates,” says Ali Wolf, chief economist at Zonda, a home construction data firm. “There have been times following the Fed’s meeting where mortgage interest rates have actually gone down and times when mortgage rates go up.”
The Fed raised its federal funds rate — a short-term rate that determines how banks borrow money from each other — by 75 basis points as part of an ongoing bid to rein in the highest inflation since the 1980s. Experts say the mortgage market has likely already “baked in” that change, moving up in anticipation of it, and that mortgage rates shouldn’t move much, barring a surprise.
Past Fed hikes offer frustratingly little guidance for what to expect, as the response by mortgage rates to previous increases has been all over the map.
“For a few months now, markets have been surprisingly surprised to hear [Federal Reserve Chairman] Jerome Powell come out and say ‘we’re hiking rates three-quarters of a point,’” says Jeff Tucker, a senior economist at Zillow.
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