> ## Content Index > Fetch the complete content index at: https://www.mortgagemomradio.com/llms.txt > Use this file to discover other available public pages before exploring further. # Why a Fed Rate Hike Doesn't Automatically Raise Your Mortgage Rate - URL: https://www.mortgagemomradio.com/why-a-fed-rate-hike-doesnt-automatically-raise-your-mortgage-rate/ - Published: 2022-07-25T21:00:00.000Z - Updated: 2026-09-04T21:30:59.000Z - Description: Two days before the July 2022 Fed decision, Debbie explains what most people get backwards: the market prices the expected hike into rate sheets before it happens. Which debts really track the Fed, why a HELOC keeps climbing, and what buyers should negotiate for instead of waiting. - Author: Deborah Marcoux - Tags: Podcast, Mortgage Mom Radio, #episode-backfill Mortgage Mom Radio • “What To Expect From Wednesday's Fed Meeting” • Live show from Monday, July 25, 2022 • 1 hour 5 minutes • Hosted by Debbie Marcoux, NMLS #237926 Two days before the Federal Reserve's July 2022 decision, Debbie sat down to explain the thing most people get backwards: the Fed does not set your mortgage rate, and by the time a hike is announced the rate sheets have usually already moved. This is the show where she walks through what a widely expected hike does and doesn't change, which of your debts really are tied to the Fed, and what a buyer should be negotiating for instead of waiting. ## Key takeaways - **The market prices the expectation, not the announcement.** A three-quarter-point hike was widely expected, and lenders, investors and mortgage-backed securities had already built it into the rate sheets. The surprise is what moves rates — if the Fed had come in at a full point, that extra quarter nobody priced in would have pushed rates higher; if they'd come in under, rates could have improved. - **What the Fed funds rate really moves:** credit cards, auto loans, student loans and home equity lines of credit — short-term debt. A 30-year fixed mortgage is long-term debt and tracks the bond market. Savings-account yields go up too, though Debbie's honest caveat is that you won't notice much. - **A HELOC is adjustable and tied to prime.** A line at 5–6% becomes 6–7% after another three-quarters or a full point, and it keeps climbing with every hike. If you need cash out, Debbie's recommendation was to look at blending it into a long-term fixed loan rather than watching an interest-only line ratchet up. - **Waiting costs more than a price drop saves.** Her example: at roughly 5.5% today versus 7.5% later, a home bought 10% cheaper still carries a *higher* monthly payment. That's before you factor in a seller who'll help with closing costs or buy the rate down — leverage buyers didn't have a few months earlier. - **Stop waiving your contingencies.** With homes averaging 17 days on market instead of selling the first weekend with 15 sight-unseen offers, Debbie's answer was flat: do not waive your appraisal or loan contingencies in this environment. If a seller won't accept them, another seller understands the market well enough to negotiate. - **You can stack a seller credit on top of down payment assistance.** Down payment assistance covers the down payment; the seller credit covers closing costs. It is possible to get into a home with effectively nothing out of pocket — and Debbie's larger point is that most people never find out because they never make the call. - **On points, the math decides.** Whether buying down the rate pays depends on the recovery period against how long you'll hold that *loan* — not how long you'll hold the house. Points are recouped much faster on a purchase than on a refinance. And if you can get a seller to pay them, that's a lower rate for the life of the loan on someone else's money. ## Chapters - 03:53Today's topic: what to expect from Wednesday's Fed meeting - 14:10What a hike moves — and what it doesn't - 15:44Why the hike was already in the rate sheets - 19:20Q&A: what if they raise a full point? - 20:51HELOCs are tied to prime, and they keep climbing - 24:31Q&A: will the hikes continue all through 2023? - 29:11Q&A: should a buyer ask the seller to buy the rate down? - 30:46Q&A: if rates rise, do home prices fall? - 32:20Buy now, or buy a cheaper house at a higher rate? - 34:22Q&A: do buyers still have to waive contingencies? - 35:25Q&A: rents are rising faster than people expect - 36:59Q&A: zero-down programs and down payment assistance - 39:35Q&A: how much closing-cost help should you ask for? - 47:51Q&A: do you get a choice about an impound account? - 48:54Q&A: is it worth paying points? - 53:36The 10-year Treasury, and an inverted yield curve ## Questions answered on this show ### “What do you think happens if they raise rates by a full percent this week?” About three quarters of a point is already built into the rate sheets we're quoting from. If the Fed comes in at a full point, that's an extra quarter nobody anticipated — and Debbie's expectation was that mortgage rates would move up a bit as a result. Conversely, if they'd come in below the expected three quarters, rates could have improved. Her caveat, repeated all show: this is an educated best guess, not a crystal ball. ### “Do you think rates will keep increasing at this pace through 2023?” Her honest read at the time: probably a couple more hikes, possibly into the first quarter of 2023, and then a ceiling — because going further would push the economy into a serious recession. She expected the Fed to take everyone to the brink of what they can tolerate, stop there, and let the recovery happen slowly. So higher rates in 2023 than 2022, but stabilizing rather than climbing indefinitely, and becoming the new normal. ### “Is it smart for a buyer to ask the seller to pay some closing costs to help buy the rate down?” Yes. Homes were averaging about 17 days on market — still fast by historical standards, where 90 days is normal, but a world away from a listing getting 30 showings and 15 sight-unseen contracts in a day. That's leverage. Ask for your appraisal contingency, ask for closing-cost help, ask the seller to buy your rate down for the first year or two. There are a lot of options that didn't exist a few months earlier. ### “If rates go higher, will housing prices go down?” Higher rates slow buyer activity, homes sit longer, more listings come to market, and competition among sellers pushes prices down. Debbie's expectation was mostly *stabilization* — appreciation slowing sharply rather than a collapse — with a possible 10–15% correction. She did not expect that in 2022; she guessed the floor would come around the first quarter of 2024\. As always, her own forecast, offered as one. ### “Isn't it better to wait and buy a cheaper house later?” Run the numbers. If today's rate is around 5.5% and by the time you buy in 2023 or 2024 rates are at 7.5%, then even buying that home for 10% less leaves you with a *higher* monthly payment than buying today. Then add a seller who'll help with closing costs and buy the rate down, which you can negotiate for now. That's the entire “coulda, shoulda, woulda” argument in one comparison. ### “Do buyers today still need to waive appraisal and loan contingencies to get an offer accepted?” No — absolutely not, in this environment. Keep them. If a seller won't take an offer with contingencies in it, there is another seller who understands the market and knows they need to negotiate to get their property sold. ### “If housing prices keep going up, will rents go up too?” Yes, and they were already moving fast. A landlord who paid a higher price at a higher rate has a more expensive payment to carry, and that gets passed to tenants. Debbie noted that California had moved to allow larger annual rent increases than the cap renters had been used to, and that inflation was hitting landlords too — appliances, carpet and paint all cost more to replace between tenants. Her framing: you're already paying a mortgage every month. The question is whose. ### “Are there any zero-down programs for educators?” There are plenty of down payment assistance programs that can get you in with zero down, and some are aimed at specific professions. They change by county, city and state, and they can be structured as a grant or as a loan. Which ones you actually qualify for depends on your credit, your income and where you're buying — every person qualifies for something slightly different. They do exist, and it's worth asking rather than assuming. ### “If I ask the seller to help with closing costs, how much should I ask for?” Closing costs run about one and a half to two percent of the sales price on average, varying by state, county and city. So if you have your 5% down payment saved but not the 2% for closing costs, that's the number to negotiate for. Debbie's advice: ask. The worst they can say is no — and if your agent won't ask, get a different agent. ### “If the seller pays my closing costs, can I still use a down payment assistance program?” Yes. The assistance program covers the down payment and the seller credit covers the closing costs — you can use both, and you could end up in the home with essentially nothing out of pocket. Debbie's point to anyone who's decided they can't buy: if you have good credit, steady employment and workable debt ratios, and the only thing missing is savings, that is exactly the call worth making. ### “Does the buyer get a choice about having an impound account for taxes and insurance?” Yes and no — it depends on your program and your down payment. On a conventional loan with 10% down or more you can choose to pay property taxes and insurance yourself rather than having them collected in your monthly payment. With a government loan — FHA or VA — taxes and insurance are escrowed in your payment regardless of how much you put down. ### “Is it worth paying points to lower your interest rate?” The math doesn't lie. Whether points make sense depends on the loan program and the rate sheet that day, and on how long you plan to be in that *loan* — not the property. One year, three, five, seven: that determines how many points you can pay and still recoup before you'd refinance. Points on a purchase are recouped much faster than points on a refinance. Debbie's view is that paying points often does come out ahead, and that it should always be worked through as a calculation with you rather than as a rule. And if you can get the seller to pay them, that's free money buying down your rate for the life of the loan. ### Want your own numbers run before the next Fed meeting? Call [844-935-3634](tel:8449353634) (844-WE-LEND-4), [start an application](https://www.mortgagemomradio.com/apply/), or use the [mortgage calculators](https://www.mortgagemomradio.com/tools/). Get the weekly rate rundown in the [newsletter](https://www.mortgagemomradio.com/newsletter/). Full transcript (lightly edited for clarity) *Auto-generated captions cleaned for readability. Commercial breaks and repeated housekeeping have been trimmed; licensing information appears at the bottom of this page. Debbie reads from a paid industry market update during this show; her reading is summarized here rather than reproduced.* ### Today: what to expect from Wednesday's Fed meeting Well hello everybody and welcome to Mortgage Mom Radio. I'm Debbie Marcoux and I am the Mortgage Mom. I come to you live every Monday or Wednesday — or both — right here on YouTube at 1 PM Pacific, and today I'm a little late off the starting block. Today we're talking about Wednesday's Fed meeting. They meet this week, and we're expecting an announcement Wednesday about increasing the Federal Reserve prime rate. What does that mean to you? How does it change things in your pocket, how does it change mortgage, and what else does it change? That's what today's show is about. Cole jumps on and says “thank God I bought in September.” Cole, the sooner anybody can buy, the better. Anybody who wanted to buy a home, or has been looking, or keeps telling themselves they're going to — you're going to be in a would-have, could-have, should-have position. And you'll feel the same way next year that Cole feels now. I want to be clear that this is my personal opinion, not something a statistic told me: I don't believe waiting to purchase a home is the right decision. ### Where the information on this show comes from Before I get into it, I want to explain where my material comes from. Being in the industry, I'm constantly getting articles sent to me. I subscribe to services, and I pay for content, because I want to give you actual data coming out of the industry — from the people running the numbers — rather than my own impressions. One of the subscriptions I use for the weekly newsletter sends me a market note every week. Last week's didn't make it into the newsletter, but the information in it was good, so I want to walk you through what it says and then talk about what happens on either side of the outcome. And a reminder: I'm giving you education and the best knowledge I have. I'm not a financial advisor, so I don't want to call it advice. ### The calm before the storm The note calls this the quiet before the storm: Fed officials went silent last week, with no speeches ahead of a meeting where a three-quarter-point hike is widely expected. It came out to me on Friday — and realize that today is Monday, and the announcement is expected Wednesday. It goes on to say that for the first time in over 40 years, the Fed is expected to raise rates by at least three quarters of a percent in back-to-back meetings. That's right — the last hike, six weeks ago, was three quarters of a point, and that itself was more than expected. Back in 2021, when the Fed started signaling that it was seeing inflation and would begin raising, everyone was led to believe it would be half-point increments every six weeks through 2022 and into 2023\. Instead the first meeting was a quarter, and then we hit three quarters, and now they're talking three quarters again. I've even heard one percent. They're moving more aggressively than anticipated. ### What a hike moves — and what it doesn't Here's the key line from the note: this rate hike will have no direct impact on home loan rates, but it will increase short-term rates like credit cards, auto loans and home equity lines of credit. Consumers should also expect a boost to the interest rate on their savings accounts. On savings: those rates fell drastically over the years as mortgage rates went to the lowest levels we've ever seen, and the return on money sitting in a savings account went to the lowest in history along with them. Inflation and rising rates will help that a little. But I don't expect it to be significant — you're not going to make a huge amount back on savings, and I still think you want to be looking at other places to grow your assets. ### Why the hike was already in the rate sheets What I find most interesting is that line about no direct impact on home loan rates. Here's why they say that. Everyone has expected this. In 2021 we were told 2022 would bring increases, and the market has been anticipating a hike this Wednesday. All of the mortgage lenders, all of the loans, all of the mortgage-backed securities, all of the investors in the bonds — they have all already anticipated it. What's happened is aggressive front-running: rates on the sheets we've been quoting you have already moved to get ahead of the curve, with that anticipation built in. So if for some reason they *don't* raise this Wednesday, we might actually see rates get a little better. What's expected and priced in is three quarters. They're not expecting a full point and they're not expecting a half. This is an article, and I agree with it — but I don't have a crystal ball and neither does the person who wrote it. Could rates go up when the announcement comes? Absolutely. But the general consensus is that if they raise by three quarters, it's already worked into today's rate sheets. That's good news for somebody who's pre-approved and shopping right now and likes the payments they've heard: it probably isn't going to jump overnight the way it has earlier this year. ### Q&A: what if they raise a full point? Heidi asks: *“What do you think will happen if they increase them by one percent this week?”* I think we've built about three quarters of a point into the rate sheets already. If they actually increase by a full point, that's an additional quarter nobody expected or anticipated, and I do think we'd probably see rates go up a bit. Again — my best guess, no crystal ball. ### HELOCs are tied to prime, and they keep climbing Back to that paragraph: the hike increases short-term rates like credit cards, auto loans and home equity lines of credit. I want you to hear that loud and clear. A lot of people right now are looking to take money out of their home — for home improvements, to buy land and build, to buy out a co-owner after a divorce or for another reason. And a lot of them are heading toward a home equity line of credit. We offer them and I can write one for you. But I want to warn you: home equity lines are adjustable and directly tied to the Federal Reserve prime rate. As prime moves up, the rate on your line moves up. So if you have a line at five or six percent today, after a few more hikes it's six or seven — and it will keep going as they keep raising to try to break inflation. You may genuinely be in a better position taking a long-term loan for the cash you need. It depends on how much cash out you need. I did a whole show on this last Wednesday — home equity lines, home equity loans and cash-out refinances, the good, the bad and the ugly. Go back and watch it if you're in that position. Car loans are short-term loans too — five or six years, not thirty — so those rates go up on the announcement as well. Mortgages are long-term rates, which is why the anticipation is already priced in. ### Q&A: will the hikes continue through 2023? Heidi asks whether the increases will keep coming at these intervals all the way through 2023. I'd like to say no. I really believe they'll hit us another couple of times, possibly into the first quarter of next year, but I think they'd throw us into a massive recession if they did much more than that. I'd expect there to be a ceiling these guys stop at so they can get everyone back in forward motion. I don't think we see it all the way through 2023 — but I also don't think we're going to see rates drop. That's part of the coulda-shoulda-woulda: if you need money now, or you want to buy now, now is the time, because rates are going to be better today than in 2023. Think about it like any recovery — surgery, a torn ACL. To get past inflation and recover from the debt on the economy, they have to raise rates to the level they think we can tolerate. They're going to push us as far as they can, take all of us to the brink of barely making it while keeping us functioning, and then try to make back as much as they can. That's not overnight and it's not fast. So I think 2023 rates are higher than 2022\. I don't think they keep raising indefinitely, but those rates stay and stabilize and become the new normal. If I had to guess as the Mortgage Mom, I think by the end of next year we're around seven and a half percent on a standard 30-year fixed — which is actually a very standard rate historically. ### Q&A: should a buyer ask the seller to buy the rate down? Heather asks: *“Do you think it's smart for a buyer to ask the seller to pay some of the buyer's closing costs to help the buyer buy the rate down?”* Yes, I do. Homes are starting to sit a little longer. I saw an article today saying the average time on market nationally is at 17 days. Seventeen days is still really short — when I was in real estate before I got into loans, a normal market was a home sitting about 90 days before it sold. But the days of a seller listing and getting 30 showings and 15 sight-unseen contracts within a day, and dictating every term, are gone. This is turning into a buyer's market, which is fantastic. Go in and ask for your appraisal contingency. Ask for closing costs. Ask the seller to buy your rate down for the first year or two. We're still under six percent; you could buy that rate down for the first couple of years into the fours or fives. There's a lot of opportunity right now. ### Q&A: if rates rise, do home prices fall? Another listener asks: *“Do you think if rates go higher, housing prices will go down?”* Rising rates have definitely slowed buyer activity. With less activity, homes sit longer and it takes longer to get an offer accepted, and more homes come to market — so in your neighborhood there might be four listings instead of one or two. That competition drives prices down. What I think we see is a lot of stabilization. I don't think we see much appreciation; that's slowing down. If we do see a price drop, I'd guess a 10 to 15 percent correction — and I don't think that's 2022\. I'd guess it hits its floor around the first quarter of 2024\. These are all my guesses. And where are rates in 2024? We don't know, but probably higher than today. ### Buy now, or buy a cheaper house at a higher rate? Last week I did a whole show on what happens if you wait to buy — what a 10% drop in property values actually does to your monthly payment. In essence: if rates today are five and a half, just as an example, and by the time you buy in 2023 or 2024 they're at seven and a half, then even buying the house for 10% less leaves your monthly payment higher than it would have been today. Now add a seller who could buy your rate down and pay some closing costs. Coulda, shoulda, woulda — right now is the time. If getting pre-approved has been the goal, get pre-approved. Don't sit on hold waiting to see what happens. ### Q&A: do buyers still have to waive contingencies? Heidi asks: *“Do you think buyers today still need to waive appraisal and loan contingencies to get their offers accepted?”* That is a no. Absolutely do not waive those in this environment. Keep them. And if a seller doesn't want to take them, there's another seller who understands the market and knows they need to negotiate a bit right now to get their property sold. ### Q&A: rents are rising Carrie says she thinks buying a house now will be better than paying rent next year. She's right, and rents are increasing very quickly — that was last Monday's show. California moved to allow larger annual rent increases than the cap landlords had been working under, partly because there were years through the pandemic when they couldn't evict or raise rent at all. And rents are exploding because of inflation too: a landlord replacing appliances for the next tenant is paying more, carpet costs more, paint costs more. A related question: *“If housing prices keep going up, will rent prices too?”* Yes. As home prices go up it costs more to buy them; as rates go up the landlord's payment to carry the property goes up. Tenants pay the price for the landlord to hold something tangible — a piece of real estate that is part of that landlord's retirement. Why would you do that for somebody else when you could do it for yourself? ### Q&A: zero-down programs and down payment assistance Manuel asks: *“Are there any zero-down programs for educators?”* There are plenty of down payment assistance programs that can help you get in with zero down. Those programs change by county, state and city. Assistance can be a grant or it can be a loan. It depends on you — your credit score, your income — and on what's available where you're buying. Every person qualifies for something a little different. But yes, they exist. ### Q&A: how much closing-cost help should you ask for? Heather asks: *“If I want to ask a seller to help with closing costs, how much should I ask for?”* It depends on how much you need. Closing costs vary by state, city and county, but on average they run about one and a half to two percent of your sales price. So if your down payment is five percent and you have that five percent of your own money but you don't have the two percent for closing costs, that's what you go negotiate for. What's the harm? Ask for it. The worst they can say is no. And if you have a real estate agent who won't ask, get a different one. She also asks: *“If I ask the seller to pay my closing costs, can I still use a down payment assistance program, or do I have to pay the costs myself?”* Yes, you can use a down payment assistance program for the down payment and yes, the seller can pay the closing costs. Ultimately you could get into that home with literally zero out of pocket. I hope everybody who has been thinking there's no way they can buy a home hears that. If you have good credit, good employment and good debt ratios and you just don't have savings, that's a good time to pick up the phone. Most of the time we are our own worst enemies — we decide we're not worthy of the financing, so we never make the call. Let us figure out whether you can do something today, or what the plan is to get you there. If you don't have a goal and a game plan, you never get to the finish line. ### Q&A: impound accounts Janice asks: *“Does the buyer have a choice about having an impound account, where property taxes and homeowners insurance are paid through the bank or escrow?”* Great question, and the answer is yes and no. If you have less than 10 percent down, the bank will require an escrow impound account. With more than 10 percent down you won't be required to have one — a conventional loan with 10 percent down doesn't require it, and you can choose to pay taxes and insurance on your own. But it also depends on your loan program. With a government loan — a VA loan or an FHA loan — you will be required to have taxes and insurance impounded in your monthly payment no matter how much you put down. ### Q&A: is it worth paying points? Jason asks whether it's worth paying points to lower the interest rate. As I've said on many shows: the math doesn't lie. Whether you should pay points is determined by the math, and we'd go through it together based on the loan program you're selecting and what the rate sheet looks like that day. Sometimes it makes real sense — a significant difference in savings over the long term, or a quick recovery of the cost. Points on a purchase are recouped much, much faster than points on a refinance. Many times paying points does come out ahead, but it also depends on your goals for the loan you're taking — not the property, the loan. If you plan to be in that loan one year, three, five, seven, that determines how many points you can pay and still recoup faster than the time you'd be in it. And if you're a buyer and you can get the seller to pay some closing costs and pay some points and bring your rate down — why the heck not? That's free money giving you a lower interest rate from the beginning of your mortgage to the end. ### The 10-year Treasury, and an inverted curve I want to finish the article, because I want to leave you with the question marks going into Wednesday — and if you're hearing this on the radio a week or two later, go back and see whether what we talked about actually happened. How will mortgage rates react? That's the unknown. Back in June, when the Fed also raised by three quarters of a percent, the 10-year note yield hit 3.49% — the highest in years — and then moved sharply lower on increased recession fears. So rates actually came down a little after the last hike, and then spiked. Today the 10-year note stands near three percent. To be clear, that's not a mortgage rate; that's the yield mortgage rates are tied to. If the economy can absorb higher long-term rates, we should expect long-term rates to move higher. Currently the two-year note yield is near three and a quarter percent and inverted with the ten-year, which typically portends a recession — and in a recession, long-term rates don't go higher and the Fed doesn't hike. That's roughly what I was describing: I think they push us to the limit and then leave us there to recoup. The Fed, which controls short-term rates — not mortgages; your car loans, your equity lines, your credit cards — is hiking the Fed funds rate to slow demand, tamp down inflation, cool off the labor market, and remove froth from the housing market. That froth is what I mean when I say appreciation slows and we might see values come down 10 to 15 percent over the next year to year and a half. But rates when we get to that point are probably quite a bit higher than today. I thought it was important to do this show before Wednesday's meeting. It's going to be very interesting to see what they do, and how mortgage rates react. ### Wrap-up To reach the team, call 844-935-3634 — 844-WE-LEND-4\. Text the word MOM to that same number and you'll get one text a week with a link so you can join the show live and ask your questions. You can also subscribe on YouTube and turn notifications on, since sometimes I go live Monday, sometimes Wednesday, and sometimes twice a week. The next home buyer workshop is Sunday, August 14th at 1 PM Pacific. It runs from the very beginning — what do all these words mean — through “I'm in escrow, what do I do now” and signing the final closing disclosure. You can attend in person or virtually; virtual attendees get the same content, the same chance to ask questions, and the same games and giveaways. And a note for those who ask how often we run them: about every six to eight weeks. Next show is all about coulda, shoulda, woulda — rates, refinances, this year versus next year, how payments change, whether you should consolidate. We'll take on the skeptics who think property values are going to fall to pieces and the people who think rates drop within twelve months. That should be a good time. Talk to you all real soon. Debbie Marcoux is licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, NMLS ID #237926, and additionally licensed in AZ (0941504), FL, GA, HI, ID, IL, NV, NC, OR, TN, TX, and WA. Rates and figures discussed were current as of the air date of July 25, 2022, reflect national conforming averages, and are not an offer of credit or a rate quote. Debbie Marcoux is not a financial advisor; consult qualified professionals about your individual situation.