Financial experts and investors widely expect the Federal Reserve to raise interest rates in a decisive move to normalize the economy. “Short term” interest rates are going up.
Will mortgage rates be on the rise as well?
Large banks and lenders have been in a rush to send out mailers urging consumers to refinance, linking the Fed interest rate to mortgage rates. Don’t be duped by these lender mailers and calls to refinance right away.
Mortgage interest rates are long-term rates and have nothing to do with short-term interest rates such as the Fed (overnight lending to banks) rate that is getting ready to increase. We will, however, see mortgage rates going up initially with the Fed rate because the consumer doesn’t understand that they are not linked, and lenders can make a quick buck.
In looking at the reasons behind the Fed overnight lending rate increase, such as lower unemployment, increased manufacturing orders, and an indication that the economy is truly on the road to recovery, it could stand to reason mortgage rates could begin a gradual rise over time.
Investors and consumers will be watching the reaction of the markets, and if all goes well, the Fed will begin the gradual ascent of interest rates normalizing the U.S. economy.
According to Bloomberg, “the average cost of a 30-year mortgage was 3.95% the week ending December 10th,” and there is a possibility rates could rise to 4.5% by the end of next year. This would not be enough to deter most buyers.
With all the chatter of the market reaction, volatile investment markets, and speculation on what the Fed interest rate will mean for individuals, it will be easy for consumers to be sucked into a mortgage refinance option that is not in their best interest.
Are you overwhelmed by the news of the Fed interest rate and what that will mean for you? Are you worried you missed your opportunity for a low interest rate for a residential home?
Here at the David M. Damaré Team, we help our clients move beyond the chatter to find the best mortgage lending option for short-term and long-term needs.
The David M. Damaré Team is here to answer your questions about financing options and mortgages during this time of uncertainty.
“Mortgage Lending is Our Business: Customer Service is Our Passion.”
Stay tuned and stay in touch with your mortgage professional. Thank you for the opportunity to serve you.
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