Rate Hike!!!

loan news

Increasing inflation and pending recession… what does this mean for those looking to obtain a mortgage to purchase a home?

In an effort to fight inflation and avoid recession the Federal Reserve is increasing interest rates. Today, June 15th, the Federal Reserve is hiking the rate by 0.75% in a bid to tackle the mounting inflation crisis in the US. Covid-19, supply chain issues, and the war in Ukraine have all led to the fastest pace inflation in over 40 years and a looming recession.

Inflation vs Recession

High inflation occurs when there is a higher demand for products and services. The demand is higher than the supply, causing prices to rise. The economy becomes overheated. We are currently experiencing high inflation. We still have supply chain issues. And the demand for goods and services is higher than the ability to supply the products and services.

A recession is the opposite of inflation. There is overall economic decline, companies make fewer sales, and people may loose work.

Will the Federal Reserve interest rate hike ward off recession?

That remains to be seen. But it could indirectly impact the housing market. The Federal Reserve does not set mortgage rates, but it can influence the overall tone for mortgage rates.