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📉 Mortgage rates are on the move. Here’s what you need to know.

Mortgage rates have been on a steep run-up since early 2022, reaching 7 percent in November before retreating to lower levels. This zigzagging has caused some turmoil in the housing market, as prospective homebuyers grapple with how to navigate an increasingly expensive mortgage landscape. So, what’s causing these wild fluctuations? In this blog post, we’ll examine the impact of the Federal Reserve’s rate hikes on mortgage rates and their potential implications for homeowners.

Understanding How Mortgage Rates Work

Mortgage rates are affected by two main factors: inflation and the Federal Reserve’s rate hikes. Generally speaking, when inflation rises (meaning prices become more expensive), interest rates tend to rise as well. This is because lenders need to make more money from borrowers to cover their higher costs. On the other hand, when inflation drops (prices become cheaper), interest rates tend to drop as well.

The Federal Reserve also sets short-term interest rates—which includes mortgage rates—through something called “quantitative easing” or QE. When the Fed raises its benchmark rate, it effectively increases all other interest rates as well, including mortgage rates. The Fed has raised its benchmark rate seven times since 2022, which has led to a steady increase in mortgage rates even as inflation remains relatively low.

Recent Drops and What’s to Come

Despite the recent increase in mortgage rates, we are seeing a slight decline recently. Mortgage rates are expected to drop in 2023 with the Fed maintaining an aggressive posture and inflation still high. However, mortgage rates will roller coaster up and down during the first half of the year before a more substantive slide takes hold in the back half of 2023. We will not be seeing the pandemic lows of 3%, but many predict closer to just over 5% towards the end of 2023. We are still working with a chronic shortage of inventory which is keeping home prices high. If you’re thinking about buying a home or refinancing your current home, now is a great time to start working with a lender. Truen Group works with one of the best mortgage lenders in the state who can help you get pre-approved for a loan and find the perfect home for you and your family.

Truen Group Real Estate Team

321 Main Street, Suite 201, Stillwater, MN

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