What the latest rate hike means for you

The Federal Reserve raised interest rates again, leaving many homebuyers and sellers wondering what it means for their next move. Does a higher federal funds rate mean mortgage rates are headed higher, too? Not necessarily. The Fed raised the federal funds target range by 25 basis points to 3.75% to 4%. This rate has a more direct impact on short-term borrowing costs, including credit cards, auto loans, home equity lines of credit and other variable-rate debt. Thirty-year fixed mortgage rates work differently. They are influenced more by longer-term bond yields, mortgage-backed securities, inflation expectations and the broader economic outlook. If markets believe the Fed’s actions will help bring inflation under control, longer-term yields and mortgage rates could potentially improve. That is why buyers and sellers should not assume one Fed decision determines where mortgage rates go next. For buyers, look beyond the mortgage rate Buyers who have been waiting for mortgage rates to come down should consider what else could change if rates improve. Over the past several years, limited inventory and intense competition left buyers facing multiple offers, bidding wars and little room ...