Although the Federal Reserve did not raise their benchmark rate last Wednesday, rates are expected to rise in the near future.  The federal funds rate, which is determined by the Central Bank, is the interest rate at which banks borrow and lend to one another overnight.  Since the beginning of the pandemic, the federal funds rate has remained ultra-low, making it easier for the banks to access cheaper loans.  As that ability begins to increase, and the Fed begins to taper the pace of bond purchases, long term fixed-rate mortgages will increase higher.

Based on all indicators, the window to close and achieve the relatively low interest rates is beginning to close.  Borrowers who are looking to refinance, and have not taken advantage of the low-rate environment, are encouraged to act swiftly before the increase takes place.  On the flip side, there are positives to the expected rate increase.  Many analysts believe that an uptick in rates may actually decrease the demand for housing, and could result in sellers willing to lower their purchase prices, while resulting in less bidding wars.  This could be very advantageous to first-time homebuyers looking to enter into the housing market.


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