In an effort to tame inflation, the Federal Reserve announced it soon will need to raise its benchmark interest rate—the first time in more than three years. That likely will put pressure on mortgage rates, and even though the Fed’s benchmark rate doesn’t directly affect home borrowing rates, they do often have an impact.

The Fed hinted on Wednesday that a quarter-percentage-point increase is soon coming to its benchmark short-term borrowing rate. This would be the first increase since December 2018.

The federal funds rate is the interest rate that banks borrow and lend to one another. The Fed’s action will likely affect borrowing and saving rates.

Already, long-term fixed-rate mortgage rates have been rising. The average 30-year fixed-rate mortgage has climbed by about 50 basis points in the first weeks of the year. Last week, rates averaged 3.56%, up from 2.77% a year ago, Freddie Mac reports.

Source: “Federal Reserve Points to Interest Rate Hike Coming in March,” CNBC (Jan. 26, 2022) and “‘The Fed Got the Memo.’ Here’s What You Can do to Prepare for the Coming Rate Hike,” CNBC (Jan. 26, 2022)