Earlier this month, on March 16, the Federal Reserve increased the target interest rate by a quarter point. This was the first time the Fed increased the target interest rate since December of 2018. The Fed also announced plans to hike the target interest rate at each of the remaining six meetings in 2022, followed by three additional increases in 2023. Although the Fed announced in 2021 that it would be increasing the target interest rate in 2022, the move reflects a more aggressive move than previously expected. The rate hikes come as the Fed attempts to mitigate ongoing inflation concerns.
As expected, the move has caused a spike in mortgage interest rates. According to Freddie Mac, the average interest rate on a 30-year fixed rate mortgage was 3.76% in early March. As of March 24, that average has increased almost a full percentage point to 4.67%.
While the move may come as unwelcome news to home buyers looking to finance their purchase, there is a silver lining. One of expected impacts of an increase in the cost of borrowing is downward pressure on competition amongst buyers. In a market where homes regularly receive multiple offers and sell for hundreds of thousands of dollars above list price, less competition will come as welcome news to many buyers.
If you would like to further discuss this issue, or how Esquire Real Estate Brokerage can help you in the Southern California real estate market, feel free to give us a call at 213-973-9439 or send us an email at email@example.com.