Fed meeting updates and live news: what to expect today

Mortgage rates have risen nearly two percentage points since the start of the year, the fastest pace in nearly four decades, making it even more expensive for potential home buyers in an already overheated market.

Whether these rates rise further may largely depend on the effectiveness of the Federal Reserve’s efforts to quickly tame inflation.

The Fed is expected to raise its benchmark interest rate by half a percentage point on Wednesday as the inflation ratedriven in large part by higher energy and food prices, it continues to grow. Since the reference rate, known as the federal funds rate, directly and strikes cost of many loans, the increase is bound to raise the cost of borrowing, slow down demand and curb the rise in prices.

Mortgage rates do not move hand in hand with the federal funds rate. They tend to track the yield on 10-year Treasury bills, which is affected by a variety of factors, including inflation expectations.

“Inflation is the hub of the wheel,” said Greg McBride, chief financial analyst at Bankrate.com. The risk is that rates will continue to rise “unless and until we have strong evidence that inflation has peaked and begins to decline,” he added.

While still low by historical standards, the rate on a 30-year fixed-rate mortgage averaged 5.10% for the week ending April 28, according to Freddie Mac. This is their high point in 12 years and up from 2.98% a year ago. The average was 3.11 percent at the end of 2021.

Higher mortgage rates, combined with soaring home prices – the existing median home was about 15% more expensive in March than the previous year – have dented what potential homebuyers can afford.

So it is muffled questionApplications have fallen to their lowest levels since 2018, according to the Mortgage Bankers Association.

“Potential home buyers pulled out this spring as they continue to face limited options of homes for sale along with higher costs due to rising mortgage rates and prices,” said Joel Kan, associate vice president of the group for economic and industrial forecasts last week.

With a 10 percent down payment on the median home, the typical monthly mortgage payment is now $ 1,834, up 49 percent from $ 1,235 a year ago, taking into account both pricing and higher fees. And that doesn’t include other non-negotiable ones, such as property taxes, homeowner insurance, and mortgage insurance, which is often required for down payments of less than 20%.

These costs add up over time. in a recent studiesJacob Channel, a senior economist analyst at LendingTree, using data from its online marketplace, found that the rate hike since the beginning of the year could cost homebuyers an extra $ 93,000, on average, over their lifetime. of a 30-year mortgage.

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