At its March 2023 meeting, the Federal Reserve raised the Fed funds rate – the amount banks pay to borrow money from each other overnight – by another quarter point, equal to the increase it instituted in February. This was the Fed’s ninth rate hike since the beginning of 2022.

The big question heading into this meeting was how the Fed would continue its initiative to curb inflation: hike, pause, or cut. Although inflation has been easing lately, the pace has not been quick enough for the Fed’s liking, so cutting its rate probably was never a possibility.

Recent turbulence in the banking sector around the world has added another wrinkle to the economic picture and made this latest decision a bit more complicated than others that preceded it. Ultimately, the Fed settled on a quarter-point increase while hinting at adjusting its approach moving forward based on future inflation data and other indicators.

What does the higher Fed funds rate mean to mortgage rates?

As we have pointed out in previous blogs about Fed rate increases, the Federal Reserve technically doesn’t determine mortgage rates. The rate of inflation has a much more direct impact on them, however. Smaller Fed funds rate increases mean inflation is slowing, which generally sends mortgage rates downward.

If you’re looking to buy a home, there are steps you can take to get an even lower rate in today’s market. One of them is the option of a Temporary Buydown that allows you to enjoy reduced payments at the beginning of your Conventional Conforming, FHA, VA, or Jumbo mortgage.

Remember: unlike the Fed rate, mortgage rates change daily and sometimes hourly. They still occasionally go down, despite the direction of the Fed rate and often in tandem with the rate of inflation.

The best way to navigate interest rates on home loans is to speak with a Homeowners Licensed Mortgage Professional about current market conditions. In any market situation, we’re here to help you understand the rates that are available to you and get the best possible pricing on your next home loan.

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