WILL a TEMPORARY LOW INTEREST RATE AFFECT YOUR MORTGAGE CHANCES?
The September meeting of the U.S. Federal Reserve board did not increase the federal funds interest rate which affects the rates given to other financial instruments such as car loans and home mortgages. Although a rate hike was expected in September, the Feds nixed that plan, citing that the American economy wasn't strong enough as the prime reason. The Feds' decision, however, created what could be considered a temporary low-interest rate for the American housing market.
How this will affect home buyers is unclear as how much the Fed will raise base interest rates is still unknown. All indications point to an interest rate hike that will happen soon, most likely by the end of 2015. If the rate hike is around 0.25%, homeowners will hardly notice the difference. The difference will come when, and if, the Fed continues to hike interest rates as the economy improves.
Most experts agree that a 25 or 50 point rise in interest rates won't produce a visible effect on the economy. An increase of 25 points on a $250,000 mortgage will raise monthly payments by about $34. What consumers need to worry about is if and when rates move beyond that point. An increase of only three percent in interest rates, however, would raise monthly interest payments by $415 on that same $250,000 mortgage.
What that means for the average home buyer is to secure a mortgage as quickly as possible. Although most houses won't disappear overnight, do everything in your power to secure a home loan now before interest rates go up dramatically. Every point rise in interest rates will mean extra payments for your mortgage, so if you are in the market for a new home, try to secure your home mortgage now before rates increase further.
For further information on how interest rate increases will affect your chance at securing a home loan contact us for free tips.
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