Mortgage Rates Near 7% — But a Drop May Still Be Coming

Mortgage rates have climbed to just under 7%, yet there's a real case to be made that rates could actually fall even as the Fed continues hiking. Here's what California buyers need to know.

It sounds counterintuitive, but hear me out: just because the Federal Reserve raises its benchmark rate doesn't automatically mean mortgage rates go up. We're seeing that play out right now.

Mortgage rates are currently sitting just below 7% — a 20-month high — following the Fed's first rate hike in three years. That's a real affordability challenge for California buyers, where home prices are already elevated. But here's the nuance most people miss: mortgage rates are tied more closely to the 10-year Treasury yield than to the Fed's short-term rate. When investors believe that Fed hikes will slow the economy and eventually bring inflation under control, long-term bond yields — and with them, mortgage rates — can actually decline.

In other words, the Fed hiking today could signal lower mortgage rates down the road, possibly even in the near term.

What does this mean for you? If you're sitting on the sidelines waiting for rates to drop before buying or refinancing, the window may come sooner than you think — and California's competitive market won't wait.

Want to know where rates stand today and what you could qualify for? Contact our team for a free rate review and personalized mortgage analysis.