The central banking system of the United States works to regulate the economy, and its actions have an impact on interest rates–something that immediately affects you if you’re a borrower. (Photo by Karolina Grabowska from Pexels).
Whether you’re ready to purchase a home right now or you plan to wait a while, you may be interested in staying apprised of the Federal Reserve’s latest decisions. The central banking system of the United States works to regulate the economy, and its actions have an impact on interest rates–something that immediately affects you if you’re a borrower. The Federal Reserve’s recent meetings signal changes to come, and here, I discuss the Fed’s game plan for the future:
The Federal Reserve announces intention to begin tapering
The Federal Reserve recently announced its plans to begin tapering the purchase of assets later this month (November 2021). This means that the central bank will reduce its monthly purchases of treasury securities by $10 billion and $5 billion of mortgage-backed securities. The committee came to this decision due to the signs of progress that the economy is showing at this stage in the coronavirus pandemic. At the onset of the pandemic, the Fed implemented an emergency rate cut and took other protective measures to bolster the economy.
Rate increases could be on the horizon
Although the Fed’s decision to start tapering is a sign of an economy in recovery, Jerome Powell, Chair of the Federal Reserve, has stated that “We don’t think it’s time yet to raise interest rates.” Many economists foresee a rate hike to follow the tapering process. The consensus among analysts seems to be that an increase of the benchmark borrowing rate is still months in the future–perhaps as much as one year away. It won’t be surprising if several rate hikes occur between 2023 and 2024 if the economy continues rebounding as the pandemic recedes and supply chain issues are mitigated.
Regardless of where you are in your home buying journey, the Federal Reserve’s decisions will have an impact on interest rates. If you’re ready to purchase now, you may benefit from today’s rates, which are still very low. For those who need more time to prepare, it will be advantageous to focus on improving your credit score so you can secure the best possible interest rate–especially since rate hikes may be coming down the pike.
By Michaela Phillips. Michaela is the Senior Lender for Synergy One Lending in Boulder. She enjoys teaching her clients the pros and cons of being a Real Estate Investor. Contact Michaela at 303.579.5517, e-mail [email protected] or visit michaelaphillips.com. NMLS: 312874.
