What the interest rate hike means for homebuyers

When the Federal Reserve sharply increased borrowing costs this week in an effort to curb sky-high inflation, a challenging year for many homebuyers became even more challenging.

Homebuyers have had to contend with the twin difficulties of increasing mortgage rates and ongoing price increases for several months.

The average 30-year, fixed-rate mortgage has increased from 4.45 percent to 6.11 percent since the Federal Reserve implemented its first rate hike of the year, according to Mortgage News Daily.

In the meantime, compared to the same period in 2021, the median price for existing single-family homes increased 15.7 percent in the first three months of 2022.

Mortgage rates will rise further and many prospective homebuyers would be priced out of the market as a result of the Fed's decision to boost interest rates by 0.75 percent.

This is the highest increase since 1994.

It is true that 30-year fixed-rate mortgage rates do not fluctuate in lock-step with the Fed's benchmark interest rate.

Instead, mortgage rates follow changes in the yield on 10-year Treasury bonds, which is influenced by a variety of factors including inflation, the state of the economy, and interest rates.

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