Will mortgage rates go up after the July Fed meeting?

July 19, 2022 - 2 min read

Will mortgage rates rise after the Fed meets?

Recent weeks showcased the volatility of interest rates as sky-high inflation and recession concerns pulled them in different directions.

The Federal Reserve’s next Open Market Committee meeting on July 26-27 could help shed some light on what actions the central bank will take over the rest of the year.

In June, the Fed said it plans to hike its rates at each of its remaining meetings. If that holds true, borrowers should look to lock in a mortgage rate before the likelihood of additional growth.

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Interest rates will probably climb

Back in May, the Federal Reserve outlined a plan to hike the target federal funds rate following each of its remaining meetings in 2022 to “rein in” the country’s towering inflation.

At its June FOMC meeting, the central bank made its largest hike since 1994, raising the target by 75 basis points (0.75%). The next day, the average 30-year fixed rate mortgage had its largest jump since 1987, surging 55 basis points (0.55%). The FOMC said in a press release that it “anticipates ongoing increases in that range will be appropriate” four more times this year.

The latest data from the Bureau of Labor Statistics showed June had the highest annual inflation rate since Nov. 1981 at 9.1 percent. And while fears of an upcoming recession abound, inflation running that high will likely give the FOMC no choice but to raise its rate target again as a counterbalance.

There is even speculation that the Fed could raise its target by a full 100 basis points (1%) at its July meeting.

The mortgage rate rollercoaster has been especially unsteady over the last month but with a probable Fed hike coming, current rates may not fall into a lower range for the foreseeable future.

The Fed’s role

The Federal Reserve doesn’t determine mortgage rates. Instead, rates are intrinsically tied to the Fed’s actions. Previously, the Fed announced plans to hike its federal funds rate at each of its upcoming 2022 meetings.

The fed funds rate is the amount banks pay to borrow money from each other overnight and an increase signals higher inflation and economic expansion. Mortgage interest rates typically rise in response to growth in the fed funds rate.

Advice for borrowers

Mortgage rates rapidly expanded for most of 2022. Although recent weeks mixed in a few major dips, the extreme pace of inflation likely means the Fed will raise its target again.

Subsequently, interest rates should grow in reaction and they may not be as low as they are today for quite some time. However, rates are still low from a historical standpoint and locking one in now will likely be better than later this year.

If you’re ready to apply for a mortgage or refinance your current loan, reach out to a local lender and see what rate you qualify for ahead of the Fed’s July meeting.

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Paul Centopani
Authored By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.