Many economists and politicians have announced that we are officially in a recession. The status and future of the economy affects you whether you are looking at a credit card, student loan, or mortgage. Here is the latest breaking news on interest rates!
The Fed Hikes Up Interest Rates
The Fed just recently hiked up interest rates again by 75 basis points. This follows a similar hike just made in June. There are many explanations for this and many ways this affects you.
First off, this move made by the Fed is supposed to reduce the current inflation from its high rate. However, in turn it will slow the economy and affect borrowers.
“Recent indicators of spending and production have softened,” the Fed noted in its statement. “Nonetheless, job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.”
Regardless of the Fed’s action taken on interest rates and the many people declaring we are in a recession; the Fed does not believe we are fully in a recession. In fact, there seems to still be a possibility of avoiding a recession for longer. According to Wilmington Truist Chief Economist Luke Tilly, “the U.S. economy is still expanding, and job growth is strong enough to avoid a recession for now, but rate hikes could lead to a material slowdown. We expect the U.S. and global economies to avoid recession over the next 9 to 12 months, but risks have risen.”
In terms of mortgages, usually fixed rate mortgage interest rates tend to rise when the Fed interest rate hikes up. Many people are cautious of homebuying and refinancing with these current conditions.
However, it is important to note that according to history, a recession does not equal a housing market crisis.
Mortgage Rate Update
As noted, a recession does not always equal a housing market crisis. Although rates have surely risen over the past few months alongside the Fed’s interest rate hike, mortgage rates have recently lowered by a half-point towards the end of July 2022 (FreddieMac). This is due to the fact that many lenders have lowered their rates amid affordability challenges and the uncertainty of the economy moving forward.
This is extremely beneficial for homebuyers! Prior to this, we have been in a seller’s market for quite some time- thus, meaning high demand, low supply, and extremely high sales price. Many homebuyers felt that the market was too overpriced to buy the home they desire.
However, with this recent change we are seeing the market slowly shift towards a buyers’ market. Buyers will now have more power in negotiating home prices and contingencies. If you are ready to pull the trigger and buy a home with the opportunity that is presented currently, contact us today!
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