Will mortgage rates go up after the September Fed meeting?

Paul Centopani
Paul Centopani
The Mortgage Reports Editor
September 12, 2022 - 2 min read

Will mortgage rates rise after the Fed meets?

The run-up to the Federal Reserve’s next Open Market Committee meeting on Sept. 20-21 has prompted big interest rate growth.

With Fed Chair Jerome Powell’s latest commentary pointing toward assertive action to bring down inflation, lenders took notice and adjusted their rates accordingly.

The average 30-year fixed mortgage rate went from 5.13% on Aug. 18 to 5.89% on Sept. 8, according to Freddie Mac. In both June and July, the Fed made its largest rate hikes in 28 years. Many industry experts anticipate an equal or larger hike in September.

Interest rate growth is likely

Since May, the Fed has been steadfast in its mission to reduce inflation by raising the target federal funds rate following each of its 2022 FOMC meetings.

The central bank is responsible for keeping inflation in check — around 2% over time — and prices stabilized, according to Powell. The longer inflation stays supercharged at high levels, the more it becomes the norm and harder to lessen, he said during a Sept. 8 conference.

Annualized Inflation came down from a 40-year high of 9.1% in June to 8.5% in July.

So far, the Fed has made good on its promise to continue raising rates throughout the year, and September’s FOMC meeting should bring another large hike. What remains to be seen is whether the mortgage market has already baked in the anticipated hike.

Mortgage rates and 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.

Immediately following June’s meeting, the average 30-year fixed rate mortgage spiked 55 basis points (0.55%). However, the day after the July meeting wrapped, the average 30-year FRM fell 24 basis points (0.24%). Because mortgage rates factor in the Fed’s current policies and its stance on future policy, as well as economic forecasts, they don’t always react to changes to the fed funds rate in a predictable way.

Advice for borrowers

Mortgage rates increased significantly throughout this year. While the possibility of a recession mixed in some weekly declines, the Fed will do everything it can to bring down inflation.

Typically, interest rates grow reactively to Fed actions and may not be lower in 2022 than they are right now. Even if they rise, they’re still low from a historical standpoint and locking a rate now will start your home equity clock.

If you’re ready to apply for a home loan or refinance your current mortgage, reach out to a local lender and see what rate you can qualify for before September’s Fed meeting.


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