Will the Fed Rate Hike Impact Your Mortgage?
Filed under: Mortgage Rates
Recently, the Federal Reserve announced that they were planning to increase interest rates, which is a big change since this is the first time the rates have increased in years. With the announcement, many homeowners are wondering how the increase will impact their pocketbook.
Why the Change?
For a long time, the Fed kept the benchmark federal funds rate consistently low to encourage people to spend money. Since the economy was lagging, they knew that low interest rates would make it easier for people to access credit and stimulate the economy with their purchases.
Since December 16, 2008, the rates have been sitting between zero to .25 percent, which is unusually low compared historical trends. This interest rate is the cost charged to the banks on overnight loans, which has a trickle-down effect on the economy and the control of inflation.
But, the Fed finally decided that the economy has recovered enough, so they decided to make a small change to increase the rates.
Will Your Mortgage Payment Increase?
If you already have a mortgage, then you may or may not experience a change in your payment and rates. Fixed mortgages will be unaffected by these rate changes, but adjustable-rate or variable mortgages might be affected. For people who are in the market to buy a new home, then it means that you might have a higher interest rate on the mortgage for the home purchase.
But, these small changes will have minimal impact on most people, especially since the rate increase was only .25%. For example, if you have a $150,000 mortgage with a variable rate for 30 years, you will only see an increase of $20 per month for your payments.
These changes are nothing to be worried about, especially since a small increase in monthly payments will be fine for most home owners. If you are thinking about buying a new home, then right now might be a great time to make the purchase before the rates are increased again!
For more information about real estate in Temecula, I invite you to contact me today. There are a number of great properties available at affordable prices, allowing you to find the perfect dream home for your family to enjoy: (951) 473-0390