Last Wednesday, the Federal Open Market Committee (FOMC), raised the federal funds rate by 25 basis points, signaling the first time the FOMC has changed the rate in two years, and the first hike since March 2018. In addition to this rate hike, the Fed indicated that they plan to raise interest rates six more times in 2022, and three times in 2023. These hikes are clearly marking an end to the ultra-low interest rate environment we have experienced over the past few years.
So how does this impact the mortgage industry? Current homeowners who have yet to capitalize on a refinance, are running out of time to do so. In addition, potential homebuyers will also experience higher interest rates on their home purchase. However, it is not all doom and gloom. With rising rates, some potential homebuyers will remove themselves from the market altogether, while others may choose to pull back on the price they will be willing to pay for a home. These pullbacks may very well force sellers to reduce their home prices to meet demand. As we are approaching the always hectic Spring housing market, the uptick in rates may actually play in the favor of homebuyers looking to negotiate on their home purchase!