Mortgage Interest Rates hit their highest levels since 2009 yesterday. The recent rise in mortgage rates is the fastest spike since the early 1980’s. Why? Inflation and the Federal Reserves attempts to address it. The Fed has a press conference tomorrow and will give an official policy announcement. This could cause more rate volatility.
The Fed is expected to hike its policy rate by 0.50%. But we need to remember this doesn’t mean mortgage rates will also rise .50% equally. The mortgage market adjusted for this probability long ago. The Fed controls short term interest rates – the rates banks use to lend to one another, not mortgage rates. However, what the Fed does to affect inflation and the overall economy does affect long term rates like mortgage rates.
Of more consequence will be if the Fed says it will be buying fewer bonds. This has a far more direct effect on mortgage rates. Depending on which path the Fed chooses, mortgage rates could have big movement tomorrow, higher or lower.