CHARLOTTE – As we all are aware the federal reserve has been following a trend to raise interest rates every quarter for what it feels like the past one year, or more. It seems as if that trend is going to continue with their announcement this week; therefore, it felt like to address this in terms of how it correlates to mortgages. The answer is, a surprising one, but it does not correlate much at all. That means, even though the federal reserve continues to raise interest rates, mortgage rates are predicted to fall.
So, how can that be? The answer is because mortgage interest rates are set on projections and expectations. For example, the inflation figures are more so the target for mortgage rates right now because a mortgage loan is typically set for 30 years. So if the value of the dollar is going to be worth less in the upcoming years (inflation high) then more interest needs to be collected to overcome a weakened dollar. If inflation begins to drop signifying that the value of the dollar will stay the same, or be worth more moving forward, then the bank can lower interest rates on borrowed funds knowing what their “interest” is going to be worth.
So, with the federal reserve raises rates, it is actually to curb inflation, which in turn will LOWER interest rates. Wonderful news right? We think so as well! As always if there are any questions with projections or mortgages, feel free to call/text/email (email@example.com / (704) 430-6138.