Have you ever wondered how all that talk about inflation and the Federal Reserve affects your plans to buy a home? Well, let me break it down for you.

The Federal Funds Rate Hikes Have Stalled

The Fed's main aim is to bring down inflation. To make that happen, they've begun increasing the Federal Funds Rate to put the brakes on the economy. While this doesn't directly control mortgage rates, it does make a difference in the end.

So, it looks like inflation is finally starting to slow down, which is a good sign that the measures taken to control it are actually working. Because of this, the Federal Reserve has been making smaller and less frequent increases. In fact, there haven't been any hikes since July.

Hey there! So, get this—the Federal Reserve hasn't increased the Federal Funds Rate in its last three meetings and they're hinting at possible rate cuts in 2024. The New York Times has the scoop on this.

““Federal Reserve officials left interest rates unchanged in their final policy decision of 2023 and forecast that they will cut borrowing costs three times in the coming year, a sign that the central bank is shifting toward the next phase in its fight against rapid inflation.””

— New York Times (NYT)

The Fed believes that the economy and inflation are getting better. Now, you might wonder why this should matter to you, especially if you're thinking about buying a home. Well, here's the deal - if things keep improving, it could mean lower mortgage rates for you and make buying a home more affordable. Exciting, right?

Mortgage Rates Are Coming Down

Here's the deal with mortgage rates. A bunch of stuff can affect them, like inflation and what the Fed is up to. Right now, the Fed has stopped hiking up rates, so it seems like mortgage rates might keep going down. Check out the graph for more details!

They've been a bit up and down lately, but based on what the experts are saying, it looks like they might keep dropping in 2024. If that happens, it could be good news for both buyers and sellers. Buyers might find it easier to afford a new home, and sellers won't feel stuck with their current low mortgage rates, making it easier for them to move.

Bottom Line

When the Fed makes decisions, it can actually affect mortgage rates, even though it might not seem obvious at first. Right now, since the Federal Funds Rate isn't going up, it looks like mortgage rates could keep going down. If you're thinking about how all this impacts the housing market and what it means for you, I'm here to help with some expert advice. Let's chat soon!