The Fed’s Latest Rate Hike Set to Impact the Mortgage Market

The Fed’s Latest Rate Hike Set to Impact the Mortgage Market

Here’s how experts say the Fed’s historic move will affect the housing market

The Federal Reserve raised interest rates 0.75 percentage points yet again, marking the fourth consecutive hike and bringing interest rates to their highest point since January 2008.

In a press conference shortly after the announcement, Fed Chairman Jerome Powell acknowledged that the hikes will negatively impact the affordability crisis already plaguing the housing market.

“Housing is significantly affected by these higher rates, which are really back where they were before the global financial crisis. They’re not historically high, but they’re much higher than they’ve been. We do understand that that’s really where a very big effect of our policies is.”

White House Press Secretary Karine Jean-Pierre addressed the rate hike in a press conference that day, noting its inevitable impact on mortgage lending.

“The Fed’s actions will help bring inflation down, and as mortgage rates increase, demand in the housing market should continue to cool. Inventory should increase, which should have the effect of lowering housing inflation.”

Lawrence Yun, Chief Economist at the National Association of Realtors, issued an immediate reaction to the news:

“Even with the Federal Reserve raising its short-term fed funds rate by another large amount, longer-term interest rates look to move only slightly. The mortgage market has already priced in the latest Fed move. Still, mortgage rates are near 20-year highs, and that hurts homebuyers. Once inflation is contained, mortgage rates will start to drift lower. It may be another year or two before that happens.”

MBA economist Mike Fratantoni also released a statement that said things should calm down once inflation begins to slow.

“Mortgage rates remain above 7%, which has caused refinance activity to effectively stop and home purchase activity to slow markedly. The combination of elevated mortgage rates and steep home-price growth over the past few years has greatly reduced affordability. The volatility seen in mortgage rates should subside once inflation begins to slow, and the peak rate for this hiking cycle comes into view.”