Last week, the Fed hiked rates by a quarter percent for the third time this year. With our improving economy, this was completely expected and is the eighth hike after the rate was held at a record low for seven years. It is now 2.00%-2.25%, which is still historically low.
The Fed Funds Rate is the short-term rate set by the Federal Reserve for overnight loans between banks. Here’s what it means for the rest of us:
- Don’t panic about fixed-rate mortgage rates. These are based on long-term rates, which the Fed hike does not directly affect. However, mortgage rates over time usually follow overall rate trends, though there are exceptions.
- Adjustable Rate Mortgages (ARMs) and HELOCs may be affected sooner. ARMs and HELOCs (home equity lines of credit) are based on shorter-term rates and may be impacted more quickly. The Fed indicated another quarter percent hike in December, so borrowers might want to lock in their rate now.*
- Now is a great time for a mortgage review. In many cases, the equity you have in your home may allow you to eliminate mortgage insurance and substantially lower your monthly payment. As with all tax matters, always consult with a tax professional before making any decisions.
Please call, text or email us with any questions you may have about financing or refinancing your home. We’re always here to help.
*The mortgage bond market is always paying attention to what the fed is doing, so expectation of future increases or decreases are usually already priced into the bond market.