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The Federal Reserve is likely to enact another 75-basis-point hike to the federal funds rate at its meeting this week, though there’s a slight chance it could opt for an even larger, 100-basis-point hike. An increase of 100 basis points is equal to a full percentage point.
Members of the Federal Open Market Committee, the committee that determines the Fed’s monetary policy, have increasingly taken a more aggressive stance as inflation has still been slow to come down. This has helped push mortgage rates up to record highs.
While high mortgage rates combined with elevated home prices have many wondering if they should wait for the market to cool before purchasing a home, buying now could be a hedge against rent inflation for those who can afford it.
“Although first-time buyers need to spend about $100 more for their monthly mortgage payment than their rent, first-time homebuyers should consider that their monthly mortgage payment is not adjusted to inflation,” Nadia Evangelou, senior economist and director of forecasting for the National Association of Realtors, said in a reaction to the latest mortgage rate data from Freddie Mac. “This means the monthly mortgage payment remains the same during the loan period. However, if rents rise about 5% for the next couple of years, these buyers will have to pay about $100 extra for their rent than their current monthly mortgage payment.”
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Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.
By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.
Are mortgage rates going up?
Mortgage rates started ticking up from historic lows in the second half of 2021 and have increased significantly so far in 2022. More recently, rates have been relatively volatile.
In the last 12 months, the Consumer Price Index rose by 8.3%. The Federal Reserve has been working to get inflation under control, and plans to increase the federal funds target rate three more times this year, following increases in March, May, June, and July.
Though …read more
Source:: Business Insider