Interest Rate Update


Since I last wrote this update back in April, interest rates have been amazingly steady. The Federal Reserve raised short-term rates again in June. That is having a direct impact on adjustable rate mortgages (that are now adjusting), home equity lines of credit, and car loans. The prime rate has now risen from 3.25% in 2015 to 5% today. They have penciled in two more increases this year potentially, which would bring it up to 5 ½%. While this does not have a direct impact on long-term mortgage rates, like the 30-year fixed, it does impact investors future expectations of inflation.

The goal of raising the short-term rates is to keep inflation in check. To the extent that they are successful in doing so, longer-term rates tend to remain consistent. Earlier this year, there were many signs that inflation was heating up, which led to a sharp increase back in January and February. Since then, while inflation is ticking up, it is in baby steps. At least so far, the Fed seems to have walked the tightrope between raising rates and managing inflation very well. Most that predict rates feel that if they continue to do so, we should see longer-term rates move up at a very slow pace. The good news is that if you’re purchasing a home and have halfway decent credit, you can still obtain a 30-year fixed rate in the four’s!

Happy House Hunting!!!