Interest rates are staying put. At least for the next few weeks.
That was the big news Wednesday after the Federal Reserve announced, leaving the benchmark interest rate unchanged at a rate of 5.25% to 5.50%.
"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run," the Fed said. "In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. The Committee will continue to assess additional information and its implications for monetary policy."
While a pause in rate hikes is welcome news for many, it still leaves interest rates elevated. The benchmark rate is already at. But could the pause now lead to additional ones later this year? And will rates drop soon after? And what does all this mean for homebuyers and those looking to refinance their existing home? For some, it could be good news.
Is the interest rate pause good news for homebuyers?
While ais no one's idea of a bargain (especially compared to the record lows of the recent past), it could be the best most buyers can secure right now. And after rates were paused, it will, at a minimum, give buyers a chance to breathe. So, in that sense, the pause is good news. But if it's an indicator of future pauses ahead of an eventual decrease in rates, that could be even better.
However, the chances of that happening are currently small.
"We're prepared to raise rates further, if appropriate," Fed Chair Jerome Powell said in a press conference Wednesday. That follows August's remarks in which he implied that additional rate hikes are possible, if not likely.
"We are attentive to signs that the economy may not be cooling as expected,"at the Jackson Hole Symposium. "We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective."
And considering that inflation rose again in bothand , the chances of a reduction in interest rates (and, consequently, mortgage rates) look dim. The Fed now anticipates two eventual rate cutes in 2024, versus the four they were forecasting as recently as June. And considering that there may still be one additional rate hike this year, Wednesday's pause may be the best buyers can get now.
Not sure what mortgage rate you'd qualify for? Find out here now.
How to get a lower mortgage rate now
While the rates of 2020 and 2021 are in the rearview, there are still. Here are two of the more effective options:
- Buy mortgage points: act as a fee the buyer pays to the lender to secure a lower interest rate. This fee can generally be rolled into the overall mortgage loan amount or buyers can pay it upfront during . While it may not get the rate as low as you'd like (think 6.75% with it versus 7% without it), it could still save you money over the long term. Just make sure that you're planning on staying in the home long enough to recuperate the points costs. Otherwise, it may not be beneficial for you.
- Apply for an adjustable-rate mortgage: An is exactly what its name implies: a mortgage with an interest rate that will adjust over time. This could be exactly what you need now if it means a lower rate to start. Just be careful because rates on these types of mortgages assuredly will rise again in the future, potentially making your mortgage payment more cost-prohibitive. Do your research on this option before signing on the dotted line.
The bottom line
With mortgage interest rates as high as they are currently, any pause in increases is good news, even if it's not as positive as a rate drop. So, if you were waiting for a time to act, now be as good as any (especially if rates go up again before the end of the year, as is possible). That said, if you want an even lower rate than what's currently available, consider buying mortgage points to lower it or proceed (cautiously) with an adjustable-rate mortgage today.
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