Why Mortgage Rates Rose When Fed Held Steady

Mortgage rates rose because inflation concerns are a more significant driver of long-term mortgage rates than is the federal funds rate. And as the Fed explains in its June 25 press release, inflation remains a concern: "Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased."

That means that the Fed's rate cuts are likely over, and rate increases may be on the horizon as inflation starts negatively affecting the economy. As a result, mortgage rates will likely rise as well.

The Federal Open Market Committee meets in August and again in September to determine any changes in the funds rate. The futures markets still expect a 2% funds rate coming out of the August meeting, but September has close to equal money on whether the Fed will hold the rate at 2% or raise it to 2.25%, or even 2.5%.

If you're looking to buy your first mortgage, or even to refinance your existing mortgage, the window of opportunity may be closing fast. This is reflected in a continued decline in overall mortgage applications, as reported in the Mortgage Bankers Association's Weekly Survey.

Search for the most up-to-date rates in the mortgage section of BankingMyWay.com. You can check out the rates at local institutions by entering your zip code.

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