A number of mortgage rates have been increased by the Federal Reserve (Fed) in the past week, like the average interest rates for both 15- and 30-year fixed mortgages.
According to CNET, the average rate of the 5/1 adjustable mortgage, which has been the most common type of variable-rate mortgage, has also increased.
Inflation to Blame in Rising Mortgage Rates
The Fed made the increase in its federal fund rate in response to an inflation surge in 2022. By making it more expensive to borrow, the central bank's goal was to reduce prices by curtailing consumer spending.
In its meeting last July 26, the Fed began a 25-basis point hike, where its federal funds rate increased by 0.25%. This marked the 11th increase in the current rate hiking cycle, which could have an impact on mortgage rates. However, experts say the markets might have already factored them into rates.
LendingTree senior economist Jacob Channel said mortgage rates would continue to fluctuate week to week, but the Fed would influence the mortgage market to anchor it in the 6% to 7% range.
Payback for Steady Mortgage Rates during COVID
Historically, mortgage rates were low throughout most of 2020 and 2021, especially when the whole world almost came to a standstill during the COVID-19 pandemic, and only increased steadily throughout 2022 when the Fed began a new set of interest rate hikes.
Realtor.com economic research analyst Hannah Jones told CNET that mortgage rates hovered in the 6% to 7% range in the past 10 months.
"Though home prices have softened slightly nationally, the still-high cost of borrowing means hopeful home buyers have felt little relief," she added.
Homebuyers Urged to Shop Around
But instead of worrying about mortgage rates, homebuyers are told to focus more on what they could control, such as getting the best rate they could for their financial situation.
Experts recommend homebuyers improve their credit scores and save for a down payment. It would also help them if they compare the rates and fees from multiple lenders to get the best deal possible by looking at the annual percentage rate (APR)
Homebuyers could also get a personalized mortgage rate by reaching out to their local mortgage broker or using an online calculator to factor in what would be the best rate and loan term for people to consider given their current finances and their goals when looking for a mortgage.
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