It’s official! After months of anticipation, the Federal Reserve Board announced a small 0.25% increase in interest rates. Wondering what this means for your wallet? Should you lock now? Is refinancing an option? Don’t worry, call me instead. I can walk you through all the options.
While it’s impossible to predict exactly how mortgage rates will react, a modest increase is no reason to panic. But it is a good reason to plan ahead, especially since the Fed is predicting more interest rate hikes in the coming year in response to the country’s improving economy and strengthening labor market.
What do Fed Hikes Mean for Mortgage Rates?
The impact of the Fed rate hikes on mortgages is driven in part by the type and terms of each home loan. Here are a few examples of how the Fed increases may be reflected in mortgage rates:
- Long-term fixed rates mortgage typically reacts similarly to US Treasury notes. Since the November election, we have seen these rates creep up. If the Fed continues to raise rates in the coming year, it is likely mortgage rates will continue to increase over time.
- Adjustable rate mortgages are typically modified annually and may be affected more significantly by continual Fed hikes. Because the mortgages are short-term in nature, refinancing can be a good way to stabilize by moving to a fixed rate.
- Refinancing decisions are best decided on a case by case basis. Simply put, if a homeowner can save a significant amount by refinancing to a get a better rate, it may justify their time and energy.
The most important step you can take to be prepared for changes in interest rates is to talk with a home loan expert (like me). We make it our business to help our customers feel prepared and informed throughout the process of getting a home loan.
If you have questions about interest rates or want to talk through your options for buying or refinancing a home, contact me. I am here to help make your home loan simple and worry-free!