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Hãy viết đoạn tóm tắt về nội dung bằng tiếng việt kích thích người mua: How the Federal Reserve’s Rate-Hike Pause Affects Mortgage Rates

Over the last year and a half, the Federal Reserve has increased its federal funds rate from near zero to between 5.25% and 5.50%. On Nov. 1, the Federal Open Market Committee said it would pause its aggressive rate-hiking cycle for a second consecutive time. That decision could mark a turning point for prospective homebuyers, who have witnessed mortgage rates soar to around 8%.

Housing market experts and economists are now watching what comes next for borrowers. Because inflation is still too high, Fed Chair Jerome Powell underlined that the central bank hasn’t ruled out the possibility of an additional interest rate hike this year. 

Will the pause on rate hikes help make buying a home more affordable? Not necessarily. “Pausing the rate hikes and keeping the federal funds rate steady on its own wouldn’t have driven mortgage rates down,” Selma Hepp, chief economist at CoreLogic, told CNET. For mortgage rates to stabilize or ease, the Fed would have to indicate that rate hikes are over and announce its intention to cut rates early next year, she said, adding that it’s an unlikely scenario.

Here’s what to know about how the Fed’s monetary policies impact mortgage rates and what other economic factors will affect the housing market in 2023. 

Read more: Mortgage Predictions for November 2023: Here’s Why Experts Say Rates Will Stay High

What role does the Federal Reserve play in the housing market?

The Federal Reserve, the nation’s central bank, consists of 12 regional banks and 24 branches. The Fed is run by a board of governors who are voting members of the FOMC, which determines overall monetary policy to stabilize the economy. It does so, in part, by setting the federal funds rate, the benchmark interest rate at which banks borrow and lend their money. 

In an inflationary environment like today’s, the Fed uses rate hikes to make borrowing money more cost-prohibitive. Banks typically pass along rate hikes to consumers in the form of higher interest rates for longer-term loans, including home loans. 

“When the Fed raises interest rates to slow the economy, rate-sensitive sectors like tech, finance and housing typically feel the impact first,” said Alex Thomas, senior research analyst at John Burns Research and Consulting. So, while the Fed doesn’t set mortgage rates directly, its decisions alter the price of credit, which has a domino effect on mortgage rates and the broader housing market. 

“At this stage of the rate-hike cycle, it’s more about what the Fed says than what it does,” said Keith Gumbinger, vice president of mortgage site HSH.com. The first step toward lower mortgage rates would be for the Fed to signal that it’s done hiking rates, he said.

How rate hikes have changed the landscape for homebuyers

If you’re looking to buy a home (or refinance your current one), you’ve likely felt the loss in your purchasing power over the last year. Inflation, rising home prices and higher mortgage rates, combined with limited housing inventory, are putting up multiple obstacles for prospective buyers. 

“It’s harder to buy a home now than at any time in the past 40 years, and even with price reductions in some markets, affordability remains stretched for anyone that needs a mortgage,” Thomas said. 

Housing market authorities predict mortgage rates will remain where they are (the 7% to 8% range) in the coming months. That’s because even though economic data shows signs of progress, the Fed won’t consider cutting rates until it feels confident that inflation is steady at its target annual rate of 2%. It might not be until mid-2024 when mortgage rates move closer to 6%. 

Here’s how today’s high-rate environment is also affecting other housing market trends, according to experts.

Adjustable-rate mortgages

“High 30-year fixed mortgage rates are pushing up demand for adjustable-rate mortgages, which are slightly lower (rates), and offer some relief in terms of monthly payment to buyers.” –Selma Hepp, CoreLogic

New construction 

“Given the lack of existing inventory for sale, sales of newly built homes have risen as builders have been offering mortgage rate buydowns to help buyers gain homeownership.” –Selma Hepp, CoreLogic

Less refinancing activity  

“Because millions of homeowners bought or refinanced when rates hit record lows in 2020 and 2021, they’re essentially ‘locked-in’ to their current low mortgage rates, since their monthly payments would increase drastically if they moved into a similar home at today’s rates.” –Alex Thomas, John Burns Research and Consulting

Continued competition

“We are still in a sellers’ market given the historically low levels of homes for sale. Lack of inventory continues to drive competition among buyers as there continues to be greater demand than available supply.” –Selma Hepp, CoreLogic

Factors that influence mortgage rates

Mortgage rates move around for many of the same reasons home prices do: supply, demand, inflation and even the employment rate. Additionally, the individual mortgage rate you qualify for is determined by personal factors, such as your credit score and loan amount.

Economic factors

Beyond the Fed’s rate hikes, mortgage rates are affected by broad economic factors like the following:

• Inflation: Generally, when inflation is high, mortgage rates tend to be high. Because inflation chips away at purchasing power, lenders set higher interest rates on loans to make up for that loss and ensure a profit.

• Policy changes from the Fed: When the Fed adjusts the federal funds rate, it spills over into many aspects of the economy, including mortgage rates. The federal funds rate affects how much it costs banks to borrow money, which in turn affects what banks charge consumers to make a profit. 

• Supply and demand: When demand for mortgages is high, lenders tend to raise interest rates. The reason is because lenders have only so much capital to lend out in the form of home loans. Conversely, when demand for mortgages is low, lenders slash interest rates in order to attract borrowers. 

• The bond market: Mortgage lenders peg fixed interest rates, like fixed-rate mortgages, to bond rates. Mortgage bonds, also called mortgage-backed securities, are bundles of mortgages sold to investors and are closely tied to the 10-Year Treasury. When bond interest rates are high, the bond has less value on the market where investors buy and sell securities, causing mortgage interest rates to go up. 

• Other economic indicators: Employment patterns and other aspects of the economy that affect investor confidence and consumer spending and borrowing also influence mortgage rates. For example, a strong jobs report and a robust economy could indicate greater demand for housing, which can put upward pressure on mortgage rates. When the economy slows and unemployment is high, mortgage rates tend to be lower.

Personal factors 

The specific factors that determine your particular mortgage interest rate include:

Even though timing is everything in the mortgage market, you can’t control what the Fed does. 

However, you can get the best rates and terms available to you by making sure your financial profile is healthy while shopping around to compare terms and rates from multiple lenders. Regardless of what’s happening with the economy, the most important thing when shopping for a mortgage is to make sure you can comfortably afford your monthly payments. 

“Buying a home is the largest financial decision a person will make,” said Odeta Kushi, deputy chief economist at First American Financial Corporation. If you’ve found a home that fits your lifestyle needs and budget, purchasing a home in today’s housing market could be financially prudent, Kushi noted. However, if you’re priced out, it’s better to wait. “Sitting on the sidelines may allow a potential buyer to continue to pay down their debt, build up their credit and save for the down payment and closing costs,” she said.

The bottom line

When the Federal Reserve adjusts the benchmark interest rate, it indirectly affects mortgage rates. The Fed’s decision to hold rates steady in November won’t have a dramatic or immediate impact on home loan rates. Instead, mortgage rates will respond to inflation, investor expectations and the broader economic outlook. 

If you’re shopping for a mortgage, compare the rates and terms offered by banks and lenders. The more lenders you interview, the better your chances of securing a lower mortgage rate.

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