The Federal Reserve issued its FOMC statement on May 4th indicating its decision to raise the target range for the Federal Funds rate to 3/4 to 1 percent from its previous range of 1/4 to 1/2 of a percent. The Federal Reserve also said in its statement that it believes that ongoing increases in the target range will be appropriate, signaling continued increases in rates in the coming months. The Federal Reserve’s March 16, 2022 release catalyzed a sharp rise in mortgage rates across the United States and so the natural question after this latest announcement is what will be the impact on mortgage rates in the coming months?

Are Mortgage Rates Set To Increase Sharply Again?


When the Federal Reserve released their statement raising rates in March, this coincided with an acceleration in the pace of mortgage rate increases. As shown in the above (the source of which is Freddie Mac) U.S. 30-year fixed mortgage rates increased from 3.8% at the beginning of March to 4.7% at the end of March, with most of the increase coming after the Federal Reserve’s action. With that said, there has since been an expectation of continued increases in the Federal Funds Rate and so there’s an argument to be made that mortgage rates have already increased in anticipation.

Mortgage Rates at Major Banks and Credit Unions May 5, 2022

mortgage-rates-may-4-22We will be monitoring the mortgage rates at major banks and credit unions to see whether there’s a significant change in rates offered following the increase in the Federal Funds Rate. Sometimes banks and credit unions take a few days to adjust their rates, but as of this writing rates are more or less unchanged compared to yesterday and remain on average slightly above the 5% level for a 30-year fixed rate mortgage. That said, as indicated earlier, mortgage rates have been increasing for several weeks in anticipation of an increase in the Federal Funds Rate. We previously discussed mortgage rates in the United States which provides more context and detail on this subject.

Have Mortgage Rates Moved in Anticipation?


This chart shows the one year history of the advertised rate for a 30 year fixed rate mortgage by Wells Fargo Bank. The chart tells a story consistent with the data from Freddie Mac: mortgage rates have been increasing for many months, and the rate of increase accelerated in March following the Federal Reserve’s commentary. We hold the view that while the Federal Reserve’s announcement yesterday included a more significant increase in the Federal Funds Rate than its March announcement (a 0.50% increase compared with a 0.25% increase), banks, credit unions and other mortgage lenders anticipated this increase. In conclusion we do not expect the rate of increase in mortgage rates to accelerate in the coming weeks.