Today we’ll go over the Fed’s plans for interest rates and bond purchases.
What does it mean when the Fed raises interest rates? The Fed controls the prime interest rate. If the prime interest rate is at 0%, like it has been since the start of the pandemic, that means the Fed charges banks 0% interest to loan money. That's why interest rates are very low.
Last week, the Fed rolled out a policy to start raising interest rates to combat inflation. They’ve announced that they're going to raise interest rates three times next year and then three or four times in 2023. This will dramatically impact the real estate market because buyers won’t be able to afford as much.
The other component of this situation is bond purchases. The federal government has been spending about $50 to $80 billion per month buying mortgages from banks. They’ve announced that they're going to reduce their bond purchases by $30 billion per month. By stimulating the economy less, it means that interest rates will substantially increase next year, and the local real estate market could be affected.
"The Fed announced that they're going to raise interest rates three times next year."
If you've been considering buying or selling a home, you should act now. We're honored and thankful to have helped so many people this year. We'll be paying attention to interest rates and update you as soon as changes happen. If you have any questions, don’t hesitate to call or email us. We look forward to hearing from you. Have a fantastic new year.