Fed Hoists Key Interest Rate as Mortgage Rates Reach New Heights

By Bollywood Fever

Plus

In a bold move Wednesday afternoon, the Federal Reserve raised the federal funds rate by 75 basis points.

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As recently as mid-May, Fed Chair Jerome Powell had signaled a 50-point increase, but following unexpectedly high inflation numbers from the Bureau of Labor Statistics, as well as geopolitical turmoil and the ongoing effects of the pandemic, the Fed acted more decisively in an attempt to rein in inflation.

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A basis point equals one-hundredth of one percent, so 75 basis points equal 0.75%. Following today’s move, this target interest rate sits at 1.50% to 1.75%.

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Meanwhile, mortgage interest rates — which had already grown by more than two percentage points in 2022 in anticipation of the Federal Reserve’s projected moves — have headed even higher

with some lenders advertising 30-year fixed rates above 6%. Rising mortgage rates have added even more pressure to home buyers already facing a complex housing market.

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Mortgage interest rates have consistently risen ahead of this year’s Federal Reserve meetings, and this week was no exception.

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After hitting a record low in 2020 and staying around 3% throughout 2021, mortgage rates rose to 4% in March 2022 and crossed the 5% threshold in April.

Interest rates for 30-year fixed mortgages are now higher than they’ve been in 10 years, and this week saw some lenders publishing 30-year rates above 6%.

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Mortgage lenders had prepared for two shifts: the expected 50-point increases and the Federal Reserve tapering its purchases of mortgage-backed securities, another strategy that helped keep interest rates down in 2020 and 2021.

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