Fed To Raise Rates In 2022?
Fed To Raise Rates In 2022?
I wanted to share with you that the Federal Reserve just had their most recent meeting here in December, and they announced that they’re going to raise interest rates in 2022. This is something that we’ve been expecting for quite some time. And I wanted to share a couple thoughts on the Fed raising rates, because this is something that’s going to affect housing for sure.
The first thing I wanted to point out is that when the Fed raises rates, that doesn’t directly affect mortgage rates, but a lot of times longer term rates like mortgage rates follow. So it would stand to reason that when the Fed raises rates mortgage rates will eventually follow and we’re likely to see higher mortgage rates in 2022.
We’ll see if that plays out that way. But the other factor that’s going on is inflation. Inflation has come out at the highest readings we’ve seen in 40 years. The Consumer Price Index, that’s the consumer rate of inflation, that’s the highest we’ve seen since 1982 and the Producer Price Index, which is an inflation number tied to the producers of goods, that’s the highest reading we’ve ever had since they’ve been tracking that number. So inflation’s looking high right now, and inflation tends to lead to higher interest rates.
That’s exactly why the Fed is talking about raising rates because higher interest rates combat inflation. Because if you think of it from an investment perspective, a fixed term investment needs to have a higher rate to keep up with inflation so that you’re not losing money on that investment. So this is something to monitor and if you’re a renter out there and you’re thinking about buying a home, right now is an excellent time to do it because rates are still low and as rates go up, of course your payment goes up so it becomes harder and harder to qualify and your monthly housing expense is going to be higher. I’m going to talk a little bit more about that on next week’s video. But in the meantime, you guys have a happy holidays. I’m going to see you after Christmas for the last video of 2021. And I appreciate all of you.
