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How Does A Rate Increase by The Fed Impact Mortgage Rates?

In an article published on, it was stated, “The Fed hinted … that a quarter-percentage-point increase is soon coming to its benchmark short-term borrowing rate. This would be the first increase since December 2018”. The reason for this predicted move is to help ease the rate of inflation.

This increase directly affects the rate at which banks lend money to each other. However, indirect impacts of this increase would be increases to rates for savings accounts, and of course, rates for borrowing. According to this article, “That likely will put pressure on mortgage rates, and even though the Fed’s benchmark rate doesn’t directly affect home borrowing rates, they do often have an impact.”

Borrowers and lending professionals have already seen slight increases in long term rates for loans such as the 30 year mortgage. At the end of January, the rates averaged just over 3.5%, in comparison to the 2.77% borrowers were seeing January 2021. Some experts predict rates could increase to 4% by the end of 2022.

Nevertheless, rates at even these increased percentages, are still hovering at historically low interest rates. Read the entire article for more details.


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