This year, the Fed raised the Fed Funds Rate (the overnight rate at which banks borrow money) 6 times to a range of 3.75% to 4.00%. Keep in mind, the Fed controls short-term interest rates which have no direct impact on mortgage rates. When the Fed raises rates, it directly affects debt such as auto loans, credit cards, and personal loans. Mortgage rates and other long-term interest rates go higher based on inflation and the overall strength of the economy.

Expectations are for the Federal Reserve to raise the Fed Funds Rate by another 1.25% by May 2023 so short-term rates are going higher still. This spike in short-term rates and the Fed's desire to keep those rates "higher for longer" could pose an opportunity to consolidate some of those higher interest rate payments into a cash-out mortgage.

We are seeing record high home equity, which means many homeowners have equity in their home from which to borrow to help retire any outstanding debt. Yes, mortgage rates have ticked up from year ago, but they have recently declined after a soft inflation reading and speculation the Federal Reserve is going to be hiking rates by a smaller amount going forward.

Bottom line: Now may be an ideal time to explore debt consolidation through a new mortgage program. Talk to your loan officer to learn more.

Source: Mortgage Market Guide