We take a closer look at the reasoning behind rising interest rates.

If you’re stressed out with the news that mortgage rates will likely remain high for longer than we expected, you’re not alone. We’ve recently received a lot of questions on this topic, which is why I’m here today to give you a brief blow by blow of what’s causing rates to rise—the short answer is that it’s our economy. Here’s everything you need to know: 

1. The Federal Reserve raised funds in a bid to slow down the economy and inflation in 2022. However, this move affected how much it would cost banks to borrow from one another. This creates a domino effect; when federal funds rates increase, mortgage rates tend to rise as well. 

2. Inflation rates remain high, even though there have been some improvements in the last couple of years. Over the last few months, inflation rates increased again, which will influence the Federal Reserve’s likely course of action. Our economic experts have also noted inflation’s massive impact on the real estate market as it indirectly causes mortgage rates to increase or decrease. This means that inflation has the greatest impact on the level and direction of mortgage rates.

“Inflation has the greatest impact on the level and direction of mortgage rates.”

3. Interest rates may decrease this year, but it may be at a later time than we’d prefer. Since the latest data point to a strong economy but still with a stubbornly high inflation rate, the Federal Open Market Committee (FOMC) decided they would have to adjust when they make the first rate cut. 

4. The market would be hard to predict, especially for buyers who are waiting for rates to come down. So, if you’re planning on buying a home, you may have to take note of this because there’s no guarantee that rates will increase or decrease, as anything can happen. To help you plan better, reach out to us, and we’ll discuss the current market conditions to figure out the next step forward to buy your new home. 

If you have any questions, you may send an email to sold@veenstrateam.com or call 269-350-5514. I would love to guide you in your real estate needs. I look forward to hearing from you!