Fed’s rate hike has big implications for home buyers and sellers
The Federal Reserve’s expected announcement of a rate increase on Wednesday has big implications for prospective home buyers and sellers, but experts have four words for anyone who’s feeling that they need to act immediately: Don’t do anything rash!
The Fed is widely expected to raise the federal funds rate by a quarter point, from a zero-0.25 percent range to 0.25-0.50 percent, for the first time in nearly a decade in an effort to keep the economy from overheating. When the Fed’s rate goes up, so do interest rates of all kinds of other consumer loans, including mortgages.
Because mortgages are longer term than many other loans, even a small increase in interest rates can mean a buyer will pay many thousands of dollars more over the life of the loan. But moving quickly to try and lock in the lowest rate may not make sense, depending on your overall financial picture, experts say.
“Homeowners should not accelerate or decelerate their purchase decisions based on a market forecast,” said Peter Lazaroff, wealth manager and director of investment research at Plancorp. “All markets, including interest rates, are forward looking. That means that debt prices have already built in expectations for slightly tighter monetary policy.”
While the Fed’s impending rate decision already has sent mortgage interest rates inching higher from historic lows and a rate hike will send them higher, experts note that it won’t happen at once and it won’t happen quickly.
