Fed Rates Expected to Increase in December

In 2008, the American economy was on the verge of collapse. The Federal Reserve invested $4 trillion to provide stimulation during the crisis.1 As a result, interest rates and FHA mortgage rates declined. However, it may now be costlier to have an FHA loan or any home loans, for that matter, as the Feds have decided on increasing interest rates.
There have already been two interest rate increases in 2017. The December increase is expected to have impacts on those who take out a mortgage loan, and it is happening because of:
1. Economic growth
2. Low unemployment
3. Anticipated job growth
4. Increased spending
5. Inflation due to gas price increases
Currently between 1% and 1.25%, the rate is expected to rise again in the coming year. What does that mean for you, exactly? Mortgage rates are likely to increase. This possibility is real, given the 10-year Treasury yield getting close to 2.40% as of December Homeowners may be considering a refinance on their loans as a result.

As for home sales trends, demand tends to decrease when interest rates are higher. Interest payments may be significantly higher over the long term. This is something you definitely want to talk about with your mortgage broker before making a decision. Deciding whether a cash-out refinance or rate and term refinance is more practical is a good idea, too.
For the latest information on FHA loans, VA loans, a fixed rate mortgage, or about all types of home loans, contact Elite Financial, a mortgage company with numerous options. Get a quote online or call us at (805) 494-9930 for help buying a home or refinancing today!

  1. https://www.nytimes.com/2017/09/20/business/economy/fed-bond-buying.html
  2. https://www.morningstar.com/news/dow-jones/TDJNDN_201712043724/bond-report-treasury-yields-on-rise-after-tax-legislation-clears-senate.html
  3. https://www.investopedia.com/articles/investing/010616/impact-fed-interest-rate-hike.asp?lgl=af-top-textlink-in-content