The Federal Reserve announced, as expected, that they would raise the prime rate by .25%. Does this mean that interest rates on mortgages will increase? What does it mean for the average Joe?
According to Dave Holding, VP of Production and Capital Markets at Mortgage Equity Partners, “while this would not mean that interest rates on mortgages would increase each time the Fed raises the prime rate by the same amount, it does mean that the cost of banks to borrow money for lending will increase in the long term. The immediate affect will be felt in the short-term as unsecured debt will be impacted. For all of us with credit cards, if you are carrying a balance, you can expect your minimum payments to increase. Folks with Home Equity Lines of credit will more than likely receive notices of increased rates around the first of the year,” he said.
But what does this really mean for us– In a nutshell:
- The economy is doing well, but growth is slowing.
- There is volatility in the marketplace–as always!
- This highlights the perspective we have on interest rates that while they may go up slightly in the short-term, they are still at historic lows.
- If you want to buy a house, you should not let this interest rate hike stop you.
“People should not panic about rises in the prime rate, if you look back historically rates were once as high at 18%. We are nowhere near that today. It is still a great time to buy,” said Sean Riley, CEO of Mortgage Equity Partners.
In fact, it appears that while the prime is rising, mortgage interest rates seem to be trending lower because of an increase of capital injection into the bond market. When money flows into the bond market, we see yields go up which in turn makes mortgage rates go down. So, the message is if you are looking for the right time to buy and you are concerned about interest rates, this new fed rate hike could potentially offer short-term relief from a rising interest rate environment.
Something else to think about: Officials initially projected three additional Fed rate hikes for 2019, but that number dropped to two. Fed members say they will continue monitoring economic data to make future decisions.
For a more detailed explanation of rates or to find out what the best rates are today, contact your loan officer. 866-877-4511.
