Thursday, December 15, 2016

Interest Rates Up: December Fed Meeting Brings No Surprises

As anticipated, the Fed increased interest rates by 25 basis points on Wednesday. The hike, which is only the second since the 2008 financial crisis, supports the Fed’s confidence in the economy.

Unemployment is back to 2007 levels of 4.6%, and the Fed is now comfortable that businesses and consumers can pay more to borrow. While rising rates affect most everyone from homebuyers to investors, keep in mind we are in an era of unprecedented monetary policy. 

“Mortgage rates were unnaturally low for a long time, and, by historical standards, they’re still low,” states Mike Dulla, president of United Home Loans. “Considering rates averaged 8% in a healthy 1990s economy, borrowers are still, and should remain, in a great position to buy a home.”

To put it to numbers, the monthly payment on a $200,000, 30-year mortgage at 4.25% is $983.88.  Up the rate to 4.5% and payment is $1,013.37, a difference of only $29.49 per month. An increase, yes, but no reason to panic. Your best bet is to lock in a rate below 5% if you’re able to purchase or refinance, but don’t think you missed the opportunity to secure a great mortgage.

Three more small increases are slated for 2017, resulting in an additional 0.75 percentage point hike by the end of next year.  If you’d like to evaluate your current mortgage before rates continue to climb, please contact us here or at 708-531-8388.


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