Fed Vows to Keep Benchmark Rate Low | Paper Source Online
Published by REALTOR Magazine | March 18, 2021
The Fed indicates they likely won’t raise interest rates until 2023—at the earliest.
The Federal Reserve voted on Wednesday to keep its benchmark interest rate near zero and at historic lows as the economy continues to recover from the COVID-19 pandemic. The Fed went on further to indicate that they won’t likely raise interest rates until 2023—at the earliest.
But that doesn’t necessarily translate into good news for mortgage rates—which have begun rising over recent weeks. The Fed’s benchmark rate does not directly influence mortgage rates. The Fed’s federal funds rate is not what consumers pay. It is what banks charge one another for short-term lending. However, the Fed’s action can have an indirect impact on what consumers end up paying on mortgage rates.
Mortgage rates loosely follow the U.S. Treasury bond, but over recent months, even that relationship has varied, Tendayi Kapfidze, chief economist at LendingTree, told MarketWatch. Ten-year Treasury rates rose in August 2020 as mortgage rates fell.
“People have been spoiled by getting sub-3% loans.” —Robert Frick, corporate economist at Navy Federal Credit Union
Mortgage rates reached an all-time low in January (the 30-year fixed-rate mortgage averaged 2.65%), according to Freddie Mac. But over recent weeks, they’ve been rising, increasing more than 30 basis points since the start of the year. Last week, the 30-year fixed-rate mortgage averaged 3.05%. Investors are growing concerned about inflation. Still, economists are quick to note mortgage rates are still hovering near all-time lows.