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How Federal Reserve decisions impact your homebuying plans
Navigating the financial world can often seem like navigating a maze, particularly when it comes to understanding the Federal Reserve's (the Fed) decisions and how they might influence your plans to buy a home. Let's break it down into simpler terms to help you understand this important link.
The Fed's focus on inflation
At present, the Fed's primary objective is to tame inflation. While we've seen a year-long trend where inflation has been slowing down, recent statistics reveal that it remains stubbornly above the Fed's target of 2%. You might have been hopeful that the Fed's progress would lead to a pause in their rate hikes. However, they are cautious not to act too soon, as this could risk causing a surge in inflation once more. This very caution prompted them to raise the Federal Funds Rate again recently.
Jerome Powell, the Fed's Chairman, made the institution's stance clear when he stated, "We remain firmly dedicated to reducing inflation back to our target of 2 percent and maintaining longer-term inflation expectations that are well anchored."
High inflation, robust economy, and the Fed's response
Greg McBride, the Senior VP and Chief Financial Analyst at Bankrate, shed some light on how persistent high inflation and a thriving economy influenced the Fed's latest decision. He explained, "Inflation continues to be unyieldingly high. The economy is showing impressive resilience and the labor market remains strong, but these elements may be contributing to the persistent inflation. Consequently, the Fed has no choice but to slow things down a bit more."
The indirect impact on mortgage rates
Though the Federal Fund Rate set by the Fed doesn't directly command the movement of mortgage rates, it certainly wields influence over them. This relationship was further clarified in a recent article from Fortune, which stated, "The federal funds rate is the interest rate that banks apply when they lend money to each other... When inflation is high, the Fed raises rates to increase the cost of borrowing and slow the economy. Conversely, when it's too low, they lower rates to stimulate economic activity."
What it means for your homebuying plans
In simpler terms, rising inflation usually means higher mortgage rates. However, if the Fed's efforts to tame inflation are successful, we might see a drop in these rates, making homeownership more within reach. But there's a silver lining - with Evergreen's Buyer Booster Program, you can get a $2,500 lender credit for refinancing if you purchase now! On the future trajectory of mortgage rates, McBride commented, "As inflationary pressures diminish, we can anticipate more steady reductions in mortgage rates throughout the year, especially if there's a slowdown in the economy and labor market."
Key takeaway
In a nutshell, the path of mortgage rates is intricately connected to the course of inflation. A slowdown in inflation could likely usher in a decrease in mortgage rates. To gain a deeper understanding of how these market changes could specifically impact your homebuying plans, it would be advisable to connect with a financial expert for personalized advice.
To learn more about Evergreen’s Buyer Booster Program and how you can get $2,500 towards your refinance visit: Buyer Booster Program
Get in touch with a trusted Evergreen Loan Officer to start your homebuying journey today!
Sources: Keeping Current Matters
Offer valid on purchase loans under contract and refinance loans closed between 7/1/2023 and 9/29/2023. The qualified borrower(s) will receive one $2,500 lender credit certificate redeemable towards a refinance on the same property. Offer is non-transferrable, may not be applied to other transactions, and may not be combined with a pricing concession. The refinance application date must be on or before 3/31/2025. The borrower must have made at least six (6) consecutive on-time payments on the purchase loan before closing the refinance. This is not a commitment to lend. Program is subject to change without notice. Not all applicants will qualify. Not all products available. Additional terms, conditions, and restrictions may apply. Call for details.
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