There has been a lot of chatter recently about a potential increase in interest rates and concern that the Federal Reserve will increase the reserve funds rate. An increase in this rate would result in an increase in the mortgage interest rates that homebuyers can get on a mortgage. No one can say with certainly if and when the rates will go up but the more you know about the way the system works the better educated you can be about if now is the best time for you to buy a home or not.
What is the Federal Funds Rate
The federal funds rate is the interest rate at which banks and credit unions can trade funds held at the Federal Reserve. When the economy was struggling in 2008 the Fed decided to lower the federal funds rate to nearly zero percent. This resulted in historically low mortgage interest rates. Now that the economy has begun to improve discussions have been raised questioning, will the Fed raise interest rates?
The Fed has not raised rates yet but the discussion is still on the table. According to the New York Times, experts are anticipating a rate hike in December.
“Nearly seven years ago the Fed put its benchmark interest rate close to zero as a way to bolster the economy. And for months now, officials have said they might raise rates by the end of 2015. Recent statements underscore an intention to act at their final meeting of the year, in December.
It’s a “liftoff” – to use the Fed’s own term – that’s getting the kind of attention that space aficionados once lavished on NASA rockets. Fed officials left rates unchanged after meeting in October, but when they do make their announcement, it will have lasting consequences.
The last time the Fed raised interest rates, in June 2006, Facebook was mainly for college students and had one-tenth the users of Myspace.”
What does this mean for the spring real estate market?
Spring is a historically busy time in real estate. People will often hold off on their home search until inventory increases in the spring. This may not be the year to wait until spring. Not only are prices more competitive in the spring but with possibility of a rate increase the best price on a home is probably available now.
For those that are currently searching for a home to buy this is a very timely topic. If you find a home you love now there is the opportunity to lock in the current low rates. That being said you never want to rush into a home that doesn’t make sense for you just to get a lower rate.
Even if you are unable to find a home you want to buy until after a rate increase there are still ways to decrease the interest you pay over the life of the loan. Paying down extra on principal decreases the interest you pay over time and can save you thousands. Asking your lender for an amortization table for your loan is the best way to visualize how you can save over the life of your loan.
At Title Mortgage our loan offers cannot guarantee what will happen with interest rates over the coming months. However it is our job to stay current on the topic and anticipate the trends. Consulting with our team and applying for a mortgage is the best way to be ready when you do find a home. There is still time left to take advantage of the low rates available now.
If you currently have been considering a refinance or have a high interest rate on your mortgage we recommend that you start the process now in order to get the lowest rate possible. Contact our team today at 603-643-1400 for the most current mortgage interest rates.