At the conclusion of a two-day policy meeting Tuesday, Dec. 15, the Federal Reserve has signaled that it’s taking aggressive steps towards the tapering of bond purchases to fight off inflation.
By Josephine Nesbit
See: Fed Chair Powell Says Omicron Poses ‘Increased Uncertainty for Inflation’ Find: How Much Is Minimum Wage? 2021 Federal and State Minimum Wage Rates
USA Today reported that the central bank now aims to end bond purchases by March instead of June. Now that long-term interest rates are expected to rise earlier than expected, how will this affect buying a house?
The Fed started purchasing bonds during the pandemic in an effort to keep borrowing costs low and to prevent any market disruptions. Interest rates have been near zero throughout the pandemic, pushing up application volume for mortgage purchases and refinances.
However, as bond purchases are tapered, long-term fixed mortgage rates will start to go up as they are influenced by the economy and inflation, CNBC reported. Once rates rise, homeowners with adjustable-rate mortgages could also be impacted.
Jacob Channel, senior economic analyst at LendingTree, told CNBC that there is an upside.
See: Advantages and Disadvantages of a Fixed-Rate Mortgage Find: Small Business Index Hits Pandemic High Note as Staffing and Investing Prospects Increase, but Supply Chain Issues and Inflation Still Top Concerns
“Because higher rates are likely to decrease demand for new housing, would-be homebuyers might find themselves with a greater selection of homes to choose from in 2022,” he said.
“Even at 4%, rates would still be relatively low from a historical perspective,” he added.
- 5 Things Most Americans Don’t Know About Social Security
- 21 Items That Are Always Cheaper at Costco
- Earn Up To $1,500 in Bonuses With This Checking Account
- Should You Refinance Now With the Low Mortgage Rates?
