On January 1, 2023, the Internal Revenue Service (IRS) raised interest rates. While these initial rate increases were announced in November, there are additional rate increases that are expected to hit in Q1 of 2023, as well, despite a move by some to pause rate hikes.
Experts started the year expecting the U.S. Federal Reserve to increase interest rates again on February 1, 2023. This increase is expected to be 0.25 percentage points, raising rates from 4.5% to 4.75%. Some say that these increases could be more like 0.5 percentage points, however.
As of January 20, 2023, Reuters says that the Fed will “end its tightening cycle after a 25-basis-point hike at each of its next two policy meetings.” After this, the Fed is expected to hold interest rates steady for the remainder of the year.
Fed officials want the U.S. central bank to slow increases to interest rates so they can better assess the impact of increased rates. Last year, the Fed raised its benchmark overnight interest rate by 425 basis points, with many of these increases coming in 75- and 50-point leaps.
These projected increases would raise rates to a 17-year high of 5% to 5.25%.
It is also important to note that the Fed can raise rates outside of their scheduled meetings, so buyers could see increases to interest rates even in months where there is no meeting.
There are eight scheduled meetings for the Fed to set interest rates in the 2023 calendar year. These meeting dates are, as follows:
- February 1, 2023
- March 22, 2023
- May 3, 2023
- June 14, 2023
- July 26, 2023
- September 20, 2023
- November 1, 2023
- December 13, 2023
After each meeting, Fed Chair Jerome Powell will hold a press conference to discuss any updates to interest rates.
Holding interest rates between 4% and 5% in 2023 may be the goal of the Fed. This could help bring down inflation and ease the disruption in the housing market. However, only time will tell what will actually happen.
What Do Interest Rate Hikes Mean for You?
If you are interested in purchasing a home with a loan, you will be affected by increased interest rates. These rates add to the cost of your loan over time. Interest rates drive up the monthly payments that you will make on your mortgage, and they will have a dramatic impact on the total cost of your home over the life of the loan.
For those who already have purchased a home with a fixed-rate mortgage, nothing will change for you. However, if you want to buy a new home, you will have to pay higher interest rates on that purchase. Anyone with an adjustable-rate mortgage will also be impacted by rate hikes because your interest payments adjust with the changing interest rates nationally.
If you are looking to purchase a home in the Kansas City metro area, contact First Fidelis today. We offer a wide range of loan options, with some of the best terms in town. We offer low-to-no down payment options and VA and FHA loans. Contact us today at 913-205-9978 to get started.