The time to act is now for homeowners looking to refinance their home loan at a lower interest rate. This is because the money markets are betting on an interest rate hike this year. In other words, they now estimate a 100% probability that the Federal Reserve will increase the fed funds rate by December 2022.

How Does the Fed Funds Rate Affect Interest Rates?

The federal funds rate doesn’t control mortgage interest rates as directly as it affects other things like savings accounts and CD rates. The Federal Reserve controls short-term rates.

Today, these rates are currently set between 0% and 0.25%. When the Fed cuts the federal funds rate, worried investors flock to the 10-year Treasury, which controls mortgage interest rates and therefore lowers rates. A rate hike on the federal funds rate has the opposite effect and acts indirectly to drive up mortgage rates. First-time homebuyers and current homeowners considering buying a home or refinancing a mortgage should explore their options now before interest rates rise and see prequalified rates in the Credible Market .

The federal funds rate has the same indirect effect on other loan products such as personal loans and student loans. Visit Credible to view a rate table to compare fixed and variable student loan interest rates from multiple lenders at the same time.

When the COVID-19 pandemic hit, the Fed lowered mortgage interest rates to stimulate the economy as it entered a recession, and refinancing rates fell. Homeowners and many first-time buyers have taken advantage of low mortgage rates. As a result, mortgage and mortgage refinancing business has grown through products such as home equity loans and other types of loans. Now pundits are debating the next rate hike as the Fed says it expects ever higher inflation levels.

A member of the Federal Reserve, Dallas Fed Chairman Robert Kaplan, told CNBC that an interest rate hike could come as early as 2022.

To take advantage of the current low mortgage interest rates and refinance your mortgage, check out an online marketplace like Credible to compare rates from various mortgage lenders.

30-YEAR MORTGAGE RATES TODAY EVEN SLIDE BELOW 3% | MAY 18, 2021

When will interest rates go up?

Lending rates are at or near record lows until 2020 and even this year. Economists had previously predicted that interest rates would continue to rise in 2020 after a series of rate hikes in previous years.

But that’s not what happened at all. Once COVID-19 hit, the Fed quickly cut the federal funds rate and interest rates hit whole new lows, leading to increased mortgage and refinancing activity. The latest report from Black Knight, a provider of mortgage technology and data, showed that the share of mortgage refinancing business has fallen to 45% of all home loans. But the data also showed that about 14.5 million homeowners would still qualify and benefit from mortgage refinancing because of the low refinance rates.

“Rates are still hovering in a historically comfortable spot, with around 14.5 million homeowners who could still qualify and benefit from refinancing,” Scott Happ, president of secondary marketing technologies at Black Knight, said in the report. . “It will be interesting – and revealing – to see both how rates move in the coming weeks and whether or not we see refi volumes increasing as a result.

The minutes of the Federal Open Markets Committee’s April meeting revealed that the Fed plans to phase out its bond purchases as the economy improves. That alone could trigger a move in rates as Treasury yields, which drive mortgage interest rates, rose shortly after the news broke.

As discussions about the rate hike increase, Federal Reserve Chairman Jerome Powell said in a recent interview with “60 Minutes” that a rate hike this year is “highly unlikely.”

But this position is not without criticism. Treasury Secretary Janet Yellen, former Federal Reserve Chairperson under the Obama and Trump administrations, said earlier this month at the Atlantic Future Economy Summit that rates may have to rise as l economy is recovering. Yellen later clarified that she was not seeking to influence the Fed’s decision-making.

While there are several opinions on when to hike rates and by how much, forecasts from voting members of the Fed show that the federal funds rate is unlikely to rise until 2022, at the earliest.

But mortgage interest rates could continue to rise slightly as the economic recovery continues. To take advantage of the current low refinance rates, visit Credible to compare rates from several mortgage lenders.

FIXED-RATE STUDENT LOAN REFINANCING RATES ARE NOT BUDGED FROM THE REGISTRATION SETTLED LAST WEEK

The price increase is a matter of time

Economists agree that interest rates will soon start to rise for mortgages, personal loans, student loans, and other loan products. While the Federal Reserve can continue to linger before raising rates to ensure continued economic growth, that may not prevent mortgage interest rates from rising slowly.

Visit Credible to connect with experienced loan officers and get their mortgage questions answered.

Have a financial question, but don’t know who to ask? Email the Credible Money Expert at moneyexper[email protected] and your question could be answered by Credible in our Money Expert column.