The Federal Reserve is raising its prime interest rate, what does this mean for mortgage rates?

HOLYOKE, Mass. (WWLP) — Interest rates were low to begin with in response to the pandemic, so raising them for the first time in three years is a sign we’re heading toward normality.

The prime interest rate increases by a quarter of a percent, in an effort to fight inflation.

Christine Gagnon is AVP Loan Officer for the Polish National Credit Union. She said that means people should see an increase in the long-term rate, like a 30-year fixed mortgage.

“Talk to your loan officer and get pre-qualified and see what that means for you in terms of affordability and if that affects what you can afford for a home,” she told 22News.

As interest rates go up, Gagnon doesn’t expect that to have an impact on people going to buy a new home, and that’s because rates are still quite low.

“Overall, this probably won’t affect most borrowers, because on a $100,000 mortgage, you’re probably talking about $50 more per month,” Gagnon said.

The Federal Reserve also said this week that it would consider raising interest rates six more times this year. However, Gagnon said that doesn’t necessarily mean the interest rate will go up six more times, it means they will review the economic situation at every meeting and make a decision from there.

“It will have some sort of effect on our long-term interest rates, but we will have to see what kind of effect it will have and how quickly they will rise,” she said.

A rise in interest rates has benefits: Gagnon predicts that the banks will catch up and that would mean the interest rate on your savings account will go up.

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