Current Interest Rate Movement

Mortgage interest rates have been hovering near historical lows since the end of June.  The low interest rates have been largely responsible for the house affordability index to remain close to all-time highs.  Meaning; although we have seen a jump in housing prices the low interest rates keep the payments low despite higher housing prices.  As the economy has treaded water the last year or so, inflation has remained in check and that has allowed the Federal Reserve to keep rates low for an extended period of time.

That all seems to be changing; the Federal Reserve has signaled that they feel the economy is doing well enough to warrant a rate hike.  Most economist; agree the likely scenario is for the Federal Reserve to raise short term rates by .25% at their next meeting in September, and to continue to “normalize” rates in the coming months by continuing to raise interest rates into 2017.

What does that mean for you? 

It means that credit cards, auto loans, equity lines of credit rates will move up the day rates are raised.  Mortgage rates will follow but usually in a path that is not easy to predict.  We do expect mortgage interest rates to go up slowly and we are already seeing pressure in the interest rate market at the 10 year yield has jumped from 1.52% to 1.68% in the last week.  I believe the affordability index will also move downward ( you can afford less) as rates move up and I would advise if you are looking to buy or refinance a home that you lock in sooner than later.

Aaron FreemanComment