Is the interest rate of the Federal Reserve Bank important for mortgage rates?

There is a lot of Understanding in today’s economyBut one thing is certain: the Federal Reserve is not planned to reduce interest rates before the home spring season. If you are on the market for a new home, the average Mortgage rates It is expected to remain above 6 % for a period of time.

At its meeting on March 19, the Federal Reserve is expected to continue to stop interest rates to monitor the economic impact of President Donald Trump DefinitionsImmigration policies and Federal workers’ demobilization. It would preserve the mortgage Useful interest rates – Which is sensitive to financial policy and economic growth – higher for a longer period.

“The borrowing costs are important to potential home buyers,” he said. Ali WolfZonda’s chief economist and the source of the new home. The cheapest interest rates make home financing more attractive, open the market for buyers for the first time as well as the current homeowners who seek to move.

“WAIT and See” approach to politics is fully responsible for the unbalanced housing market, which is still suffering from Limited stock And very slope Home prices. For better or worse, the Federal Reserve Bank Relationship with household loans rates Not direct or immediate as well. “While the Federal Reserve can definitely affect the mortgage rates, investors are the real engines,” Wolf said.

When it comes to the mortgage market, what is the central bank He says It matters more than what Do. On Wednesday, investors and bond market merchants will be looking for the updated federal reserve summary of economic projections, which define future monetary policy based on economic growth, inflation and the labor market.

“If the Federal Reserve connects any kind of shift in their economic expectations or the future path of short -term rates, mortgage rates can fluctuate,” said Wolf. For example, bond returns and mortgage rates may increase if the Federal Reserve Chairman Jerome Powell indicates concerns about the high inflationary pressures. but Mortgage rates can decrease If Powell talks about increasing the risk of stagnation or slow economy.

Read more: Check the truth: Trump does not have the authority to impose low interest rates

How does the Federal Reserve affect the mortgage rates?

The Federal Reserve is supervised and supervised by US monetary policy under a double mandate to maintain price stability and the maximum employment. It does this largely by controlling the rate of federal funds, and the rate that banks borrow and give their money.

When the economy is in a state of stagnation or recession, the federal reserve Reduces interest rates To stimulate consumer spending and payment growth, as it did during the Covid-19s.

In an inflationary environment, the Federal Reserve raises interest rates to slow economic growth. For example, the Federal Reserve raised the record interest rate by more than five percentage points between early 2022 and mid -2013 to combat inflation by curbing borrowing and spending.

Although the Federal Reserve does not determine the real estate mortgage rates, changing the credit price leads to a slow impact on the domino on the mortgage rates and the broader housing market. Banks usually pass along the high federal reserve rates or cuts to consumers through long -term loans, including household loans.

Since the mortgage rates respond to many economic factors (see below), it is not uncommon for federal funds and mortgage rates to move in different directions for some time.

Read more: Why employment data of mortgage rates and federal reserve chat

How will the Federal Reserve rate reduce real estate mortgage rates?

In 2024, the Federal Reserve reduced interest rates three times to a total of one percentage. At the beginning of 2025, it is Their campaign is fixed “To assess the data carefully, advanced expectations and balance risk.” The Trump’s Economic Wars and Commercial Wars, which is expected to feed the price growth while inflation remains sticky, continues in the cloud of expectations to reduce prices.

Although the Federal Reserve is currently expected to reduce 0.25 % in 2025, it may change this week. According to CME Fedwatch toolInvestors are betting on reducing the next rate in June or July. In order for the Federal Reserve to resume interest rates reduce interest rates, policy makers will need to see a continuous decrease in inflation or a rapid deterioration of the labor market.

Today, the turbulent political and economic environment is already raising fears among investors that the United States may tend to stagnate. During the past month, the stock market decreased, and collective workers’ demobilization operations have struck the public and private sectors, and families have reduced spending and consumer confidence decreased.

Wolf said that the cooling economy is significantly or other tension for consumers, businesses and investor addresses may lead to a decrease in mortgage rates. However, the mortgage Prices are always volatileAnd the decreases will not be radical. Most housing market experts see average fixed rates for 30 years 6 % and 7 % For most 2025.

Although mortgage rates usually decrease during difficult economic times, the recession will not lead to a more affordable housing market. If American families are struggling with The effect of high prices And the decrease in purchasing power, not to mention a Lack of stable workThey will be less likely to buy homes.

“Consumers need to feel comfortable in their financial well -being to make the largest purchase of their lives,” Wolf said.

What are the other factors that affect mortgage rates?

Mortgage rates Move for many of the same reasons that make home prices: supply, demand, inflation and even employment.

Personal factors, such as housing buyers Creditand Premium And the amount of home loan, also specifying the individual mortgage rate. various Types of loans and conditions Also vary Useful interest rates.

Politics changes: When the Federal Reserve controls the rate of federal funds, it affects many aspects of the economy, including mortgage rates. The rate of federal funds affects the amount of banks ’cost to borrow the money, which in turn affects the consumer banks to make a profit.

Economic inflation: generally, When inflation is highReal estate mortgage rates tend to be high. Since inflation comes out of the purchase force, lenders have put higher interest rates on loans to compensate for this loss and ensure profit.

I offer and demand: When the demand for real estate loans is high, lenders tend to raise interest rates. This is because they only have a lot of capital for lending in the form of household loans. On the contrary, when the demand for mortgages is low, lenders tend to reduce interest rates to attract borrowers.

Bond market activity: The mortgage lenders explain the fixed interest rates, such as the mortgages with a fixed rate, to the prices of bonds. Mortgage bonds, also called the mortgage -backed securities, are a package of real estate loans that are sold to investors and closely related to a 10 -year treasury. When the interest rates are high, the bond has a lower value in the market as investors buy and sell securities, causing high real estate interest rates.

Other main indicators: Employment patterns and other aspects of the economy affect the investor’s confidence, consumer spending and borrowing of mortgage rates. For example, a Strong job report A strong economy can indicate an increase in the demand for housing, which may lead to upward pressure on mortgage rates. When the economy and unemployment slow down, the mortgage rates tend to be less.

Is now a suitable time to get a mortgage?

Although the timing is everything in the mortgage market, you cannot control what the Federal Reserve does. “The prediction interest rates are almost impossible in today’s market,” Wolf said.

Regardless of the economy, the most important thing when shopping for a mortgage is to make sure that you can conveniently withstand your monthly payments.

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