August 19, 2022

The Fed raised interest rates in July, so why have mortgage rates come down?

The Federal Reserve raised the federal funds rate by an additional 0.75% at the end of July, on par with their June rate increase and a record-high jump. 

The federal funds rate is a benchmark interest rate, and most interest rates across all industries usually rise and fall alongside the Fed. Despite the interest rate raise, mortgage rates have actually come down slightly since the rate raise, from 5.54% for a 30 year fixed rate mortgage down to 5.22%. Why is that?

Multiple factors go into mortgage rates, one important being the Federal funds rate. The Fed rate in July was widely expected, however, and had already been priced into mortgage rates when they started rising in May and June. 

Additionally, the Federal funds rate is an important factor in mortgage rates, but not the only one. Supply and demand for mortgages impact pricing and subsequently rates.

As the Fed’s interest rates have spiked in recent months, demand from buyers for mortgages has slowed down; with mortgage applications hitting a low (down 18.5% vs. last year), mortgage originators have brought rates down low.

The recent decline in mortgage rates provides an opportunity for motivated buyers to bring down their monthly costs of owning a home. And with a few more motivated buyers entering the market, sellers who may want to sell in the next few years may want to list now. 

For real estate agents, this market slowdown is a perfect opportunity to focus on building your brand, adding real estate expertise to your business and learning new tools and products by expanding your network.

Join the Courted network today to connect with a growing community of real estate agents and how they are all navigating the current market conditions.


Freddie Mac

Mortgage News Daily