Rate Hikes And What They Mean For You

Rate Hikes And What They Mean For You

In an article posted three days ago, Bankrate.com stated:Image title

                “The average 30-year fixed-mortgage rate is 4.17 percent, up 15 basis points over the last                          seven days. A month ago, the average rate on a 30-year fixed mortgage was lower, at 3.51                   percent.

                 At the current average rate, you'll pay principal and interest of $487.27 for every $100,000                        you borrow. That's up $8.70 from what it would have been last week.”

                Why is the Fed raising these rates? To answer that question, we need to look at the economy outside of the real estate industry. From late 2007 to 2009 our economy suffered the greatest recession since the Thirties. With the housing collapse and America losing nearly 16 trillion of its wealth, consumer spending grinded to a stop. Because of this, the work force suffered. America went from a national unemployment rate of 4.6% in 2007 to a staggering 9.8% within 3 years, beating the high unemployment rate of the early 80’s. Recession moved to the brink of depression.

                Our economy began to rebuild. Unemployment continued to drop and with that come more consumer spending. The Feds knew that the creation of money in the form of purchased US securities would infuse the market with capital. This would lower the rates, which would in turn provide the American people with more buying power. And it did. Interest rates continued to fall and was coupled with the appealing first time home buyer tax credit.

                The question of sustainability still looms in everyone’s mind. As of this year we are seeing unemployment rates reach pre-crisis lows. A lot more money and equity is being passed around. How much of a good thing is too much of a good thing? If continued, we may see the entire cycle (though not as pronounced) run its course again. The Fed has its concerns about one major component of our national economy. Inflation. To keep this in check the Federal Reserve will sell off securities. This is taking money out of the economy and in turn will increase interest rates for borrowers.

                There is no telling how high the rates will rise. Four hikes were predicted in 2016 with only one taking place. The 80’s and 90’s averaged between 6.79% to over 14%. The best we can do is act now while the rates are low.

                 Obviously, the direct correlation can be made between mortgage rates and the buyers applying for those mortgages. If you are looking to buy, now is the time. But, there are 2 sides to every coin. If you had ever thought about selling your home, now is the time. Every rate hike will give your potential buyers less and less buying power and equity can be lost in another cycle. Don’t roll the dice with an asset this costly. Call me today for a FREE in home consultation where we can explore your options to transfer or cash out your equity and make you the most money in the sale of your home.

Matt Rodriguez Headshot
Phone: 864-354-9100
Dated: December 22nd 2016
Views: 337
About Matt: Working in sales for a better part of a decade, I know how much effort and attention it takes to bri...

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