The Advantages of Securing Your Mortgage Rate Prior to the Subsequent Federal Reserve Meeting

As we approach the end of the year, potential homebuyers face a crucial decision: Should they secure their mortgage rate now or wait until after the next Federal Reserve meeting? According to financial experts, the answer is clear – act now.

At its last meeting, the Federal Reserve maintained interest rates, keeping benchmark borrowing costs between 5.25 and 5.5 percent. However, economists are increasingly confident that the central bank will raise rates by a quarter percentage point before the year ends.

This action aims to control inflation, and once implemented, rates are expected to remain high for some time.

3 YEARS AGO:

– Gas was $2 a gallon
– Eggs were $1 a dozen
– Mortgage rates were 3%
– Inflation was less than 1%
– We had full employment
– & the World was at peace

TODAY:

– Gas is over $4 a gallon
– Eggs are over $4 a… pic.twitter.com/KMJDPnvB7C

— 𝐓𝐡𝐞 𝐀𝐫𝐭 𝐨𝐟 𝐏𝐮𝐫𝐩𝐨𝐬𝐞 🇺🇸 (@creation247) October 8, 2023

While the Federal Reserve doesn’t directly control mortgage rates, its actions have a significant impact on the real estate market.

According to data from Freddie Mac, the average 30-year fixed-rate mortgage has already risen to 7.49 percent. If the Fed decides to raise rates, this figure could rise even further in the coming months.

The volatility of mortgage rates has been a hot topic since the Fed started increasing interest rates in March 2022. Deals on a 30-year fixed-rate mortgage are not directly tied to the Fed’s funds rate but are influenced by the yield on 10-year Treasury bonds.

These yields are affected by factors such as inflation, Fed actions, and investor responses.

Financial expert Andrew Lokenauth advises potential homebuyers to lock in a fixed rate now. He warns that the Fed’s actions will impact consumers, leading to higher interest rates. He also predicts that interest rates will continue to rise this year and possibly into the next, leveling off only around 2025.

Mortgage purchase applications in the US have fallen to their lowest level since 1995. The average American household simply cannot afford the average home price at current mortgage rates (7.7% for 30-year fixed). pic.twitter.com/DHWzlXUiOw

— Charlie Bilello (@charliebilello) October 4, 2023

Lokenauth also suggests that Americans should carefully consider their options. If you lock in a deal today and rates go down, you can always refinance. Conversely, if rates go up, you’ve secured a good deal and can save significantly.

Another factor contributing to higher mortgage rates is the current shortage of homes for sale. Homeowners with low mortgages of 2 or 3 percent are reluctant to sell, limiting the housing supply and driving up property prices.

This situation is likely to keep mortgage rates high for a longer period.

Jeff Scott, from First Option Mortgage in Atlanta, Georgia, also advises homebuyers to lock in the current rate. He points out that the significant supply and demand issue gives buyers more negotiating power. Sellers are offering more concessions to buyers to lower rates, which can save thousands on loan repayments.

With the possibility of further interest rate hikes, potential homebuyers would be wise to secure their mortgage rates now. Waiting could lead to higher costs in the future, making homeownership less affordable. 

This article appeared in Our Patriot and has been published here with permission.