Interest Rate Increase: What Does This Mean for Home-Buyers?

    That’s right, it happened folks – the Federal Reserve raised its interest rate by a quarter point this past Wednesday. This is only the second time the benchmark interest rate has been raised since the 2008 financial crisis. So, what does this mean exactly?


    This means that the economy is growing stronger, and the only direction the interest rate can really go is up because it has been so close to 0% since 2008. Economists predict that the interest rate will continue to rise steadily over the next year, so this may not be the only interest rate increase we experience.

    In terms of home-buying, this interest rate increase does not technically have a direct effect on mortgage rates. However, when the benchmark interest rate increases, banks tend to follow this trend and increase long-term mortgage rates.

    Because most Americans opt for a 30-year, fixed-rate mortgage, it is important to be aware of this interest rate increase and the projected continuous increase. In recent years, fixed-rate mortgages have been extremely affordable. But with the Federal Reserve’s projected continuous rate increase over the next few years, mortgage rates will also likely continue to increase. Currently, the 30-year fixed-rate mortgage is 4.15% – up from 4.13% last week.

    What is there to expect in the housing marketing in 2017, then? Higher long-term mortgage rates, and potentially a depletion in the number of home sales that occur. However, with an increase in mortgage rates also comes a dip in the number of new mortgage contracts being issued. So, this may incentivize brokers to be more flexible with mortgage requirements.

    Ultimately, if you are in search of purchasing a home or getting a mortgage in 2017, keep an eye out for Federal Reserve interest rate increases, long-term mortgage rate increases, and how much wiggle-room your broker can give you when acquiring a mortgage.


    Trackback from your site.

    Leave a Reply