![]() Now that inflation is cooling, economists expect rates to stabilize and potentially decline over the next year. But keep in mind that the Fed’s moves are just one factor and that rates can change daily based on market conditions. Keeping an eye on Fed policy can help you gauge the direction of mortgage rates and decide when to lock in a rate. However, there’s usually a lag between Fed actions and mortgage rate changes, and market forces like inflation and economic uncertainty also play a key role. When the Fed is cutting rates to stimulate growth, mortgages tend to get cheaper. ![]() ![]() In general, when the Fed is hiking rates to cool the economy, mortgages get more expensive for borrowers. When the Fed raises rates, it puts upward pressure on the 10-year Treasury and mortgage rates often follow suit. Mortgage rates also typically follow the direction of the 10-year Treasury yield, which is influenced by the federal funds rate and investor demand for longer-term bonds. So the Fed’s target rate doesn’t directly dictate mortgage rates, but it does contribute to the overall interest rate environment. That’s because the federal funds rate serves as a benchmark for many other rates, including the prime rate used by banks to set rates on credit cards, auto loans and home equity lines of credit (HELOCs). When the Fed raises or lowers the target rate range, it influences interest rates across the economy. While the Fed doesn’t directly control mortgage rates, its policies influence the interest rates lenders charge consumers. Over the last year, mortgage rates have risen sharply as the Federal Reserve raised its benchmark short-term rate to combat inflation. Your individual rate may vary based on your location, lender and financial details.
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