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Tuesday, January 3, 2017

Recent Interest Rate Increases Will Affect Everyone

The recent interest rate hike impacts everyone in the real estate market. Here’s how.

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What does the increase in interest rates mean for you?

The Federal Reserve’s interest rate setting committee on Wednesday said that it would raise interest rates by a quarter of a percentage point to between 0.50% and 0.75%. It is only the second time the U.S. central bank has raised interest rates since 2006 when the economy was yet to be hit by the financial crisis.

So what does this mean for the real estate market?

First, if you’re going to buy a home, chances are that you will opt for a 30-year, fixed-rate mortgage like most home buyers do. Those loans have become remarkably affordable, especially since the financial crisis, with their interest rates bottoming out at around 3.5%.

In general, movement of the Fed’s rate does not have a large, direct impact on long-term mortgage rates. But when the Fed’s rate goes up, banks find ways to pass their higher borrowing costs along to consumers.

Because long-term mortgage rates are set in stone, they also factor in the anticipation of future rate increases. That’s part of why mortgage rates have shot up in recent months—the Fed has suggested that interest rates will likely continue rising for years.

As mortgage rates go up, people are a little less likely to buy a house, and those with fixed-rate mortgages are less likely to refinance because they probably will not end up with a better deal.

Now is definitely the time to either
buy or sell your home.

What does this all mean for you? It means now is the time to either buy or sell your home. The interest rates are still low and you will be able to lock in that rate.

If you have any more questions about why now is the best time to buy or sell a home, give me a call or send me an email. I’d be happy to help.

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