When the government Reserve raises interest rates, because they did today with a quarter-point increase from 1.25 to 1.Five percent, we’re all going to feel it. This is actually the fifth time interest rates have increased because the Fed cut rates to just about zero during the recession of 2008.
Interest minute rates are going up — and it may affect your mortgage. Click the link to get in touch with a loan officer who are able to help.
The Fed, or even the Fed Bank, represents the United States’ central banking system, developed by Congress more than 100 years ago to provide the country having a safer and more stable economic climate, increased interest rates today as a positive indicator our U.S. economy looks healthy. Because the Fed explained in their FOMC statement issued on December 13, 2020, “The labor market continues to bolster and… economic activity has been rising at a solid rate. Averaging through hurricane-related fluctuations, job gains have been solid. The unemployment rate declined further.” Household spending, says the Fed, continues to be increasing moderately. Recent business investment growth has additionally acquired.
The Federal Reserve raised interest rates: What happens next?
The federal funds rates are set by the Fed and used as a benchmark for consumer interest rates. Financial institutions base lending rates on the prime rate based on the Fed rate. When the Fed rate increases, the best rate increases too, and consumer rate increases could follow. Historically, the Federal Reserve increases rates of interest to battle inflation by making money scarcer. This time, economists say the Fed is hoping to get the eye rate to its long-term neutral position. Prior to the recession, it had been closer to 3 to three.5 percent.
This is the third time the Federal Reserve has raised rates of interest in 2020, with the possibility to impact:
- Auto loans – The Federal interest rate hike primarily affects short-term interest rates. But it may also impact medium-term fixed loans that include auto loans. People who plan on purchasing a car in the new year might be best securing a lower-rate auto loan now — before rates increase three more times, as forecasted for 2020.
- Credit card rates – Because of the rate hike, loans can become more costly, and credit card interest may also increase. Variable credit card interest rates derive from the prime rate. Now, financial analysts recommend that consumers place a high priority on reducing credit card debt. (Or switching to a 0 percent interest card, if possible.)
- Job market – Raising the federal funds rate can slow the economy and lead to fewer hires.
- Mortgage rates – Thankfully, compared to the other ripples in the pond, effects on mortgage rates are expected to be minimal. Mortgage loans with 15- to 30-year loans don’t fall under the short-term category. New borrowers hoping to buy may be slightly affected by fluctuations in home loan rates and can get a rate quote by talking to a lender.
Buying a home doesn’t have to be hard. Download our free LoanFly app and obtain prequalified in as little as 15 minutes.*
Talk to some loan officer about mortgage rates
The rate hike means home loan rates could slowly sneak in. This is particularly important for people who actually have adjustable-rate mortgages or home equity lines of credit. To get in front of the rise, speak with a loan officer as soon as possible about your options. New buyers might be able to see monthly savings by locking in a loan with a lower interest rate, before more hikes occur in 2020. This is often reflected inside a lower monthly mortgage payment. Homeowners with adjustable-rate mortgages, the type of mortgage that appears to be affected by the Fed rate hike, will benefit from a mortgage refinance.**
The rate hike isn’t necessarily negative — this is an indicator our economy is bouncing back. We can’t understand how quickly consumer rates will be affected, but we are able to assist you to arrange for your future. The free LoanFly app makes it much simpler and faster to purchase and refinance. LoanFly also makes it simple to connect to a local loan officer who’s ready to answer your mortgage questions.