Federal Interest Rates: Expect a Rise

Interest rates - not the most exciting topic. But that doesn't mean it's not important, so pay attention. No matter your situation, a climb in interest rates will affect you, and you don’t want to pass on the opportunity to take advantage of low mortgage rates.

For a while now, interest rates have been at a historic low, but just a few weeks ago, the Federal Reserve meeting told the country that plans to increase its benchmark interest rate will likely go into effect at the next meeting this month. The recent recession linked with a plunge in the economy prompted the Fed to intervene with interest rates at 0 percent in order to avoid another Great Depression. While a brilliant and helpful move under the circumstances, the organization is now working to unravel that plan, getting rates back to a normal, healthy level.

So what will this change mean for you? Well, if you're thinking of buying a home or if you're paying off a mortgage, it means that the decisions you make in the next few months could determine how much you'll pay - or save - for years to come. Find out how a hike in Federal interest rates could affect your wallet!

Rate Hikes: Not If, but When

The Fed scheduled hikes to occur earlier in the year, but they delayed due to the sharply fluctuating winter market conditions. Over the course of the recent recession, the Fed has held rates so low to encourage risk-taking and borrowing. Basically, the gist of their idea is that borrowers would feel more confident in making investments, allowing the economy to grow to a point where it could support a rate increase.

Investors were originally doubtful that an increase would actually occur until some point in 2017, but expectations changed drastically with the recent Federal Reserve meeting. It’s clear that whether the increase happens this month or later in the year, an increase will happen soon. The biggest question now is whether or not the raises will occur at the next meeting as scheduled.

The economy is starting to pulse with life again, allowing the Federal Reserve to “gradually and cautiously” raise bank rates. In a statement directly from Janet Yellen, head of the Federal Reserve, she says, “a rate rise would probably be appropriate in coming months.”

But why would this increase be necessary in the first place?

In the past, the Fed has likely not hiked rates due to the big fear that there would be a negative effect in the market. And the worst-case scenario is that a rate increase would plunge the economy into an even deeper recession or depression. However, there are several undeniable facts that prove it would not only be helpful, but absolutely necessary.

First of all, the Fed benchmark rate cannot go any lower. The only available direction is up. Secondly, the U.S dollar would strengthen (which is great news for anyone traveling abroad, particularly in Europe). Third, retirees will have more money flowing into their savings funds. And finally, inflation will be brought under control.

Future Mortgage Rates

The fact that the Federal Reserve feels comfortable raising rates indicates that their plan is working, and the economy is indeed healthy and growing. Definitely a positive thing, right? But what does this hike mean for consumers? And how will this affect the housing market?

The hike affects just about every asset class, meaning anything that has interest tacked onto it will have higher rates than what the U.S. economy has experienced in the past few years. Although this is good news for your savings account, your debt is going to take a bit of a blow. While it would make sense that a drop in rates would encourage borrowers to borrow, the opposite would also seem to be true. But before anyone gets too panicked, know that statistics say consumers are ready to handle an increase. In addition to that positive note, consumers can also be assured that interest would not spike all at once. The meeting’s minutes noted that “economic activity would expand at a moderate pace,” giving everyone a chance to adjust to the change.

Specialists say that consumers can expect this rate rise to affect interest for mortgages in addition to other bank loans. Although a rate rise could eventually result in a housing market slowdown, the market should boom initially, and homeowners and home buyers can expect a general increase in demand, prices, and equity.

Take Advantage of Low Rates Today!

If you are a home-buyer, jump on the market now rather than waiting. Interest rates will only go up from here. Purchasing a new home or refinancing your current home now could save you thousands of dollars in interest over the course of your loan. To take advantage of current mortgage rates, call us or visit our site at www.lowvarates.com to get started on your loan application.