Will Interest Rate Hikes Affect You?

By: Jorge Lopez, December 18, 2015

Yesterday the Federal Reserve announced that it will be raising interest rates by 0.25 percent, the first time it has done so in more than seven years, where it had remained near zero percent as a means of allowing some room for employment and market recovery.  There were rumblings that the interest rate was going to increase, leading to a boost in buying activity.  If you happened to miss out, this boost does not necessarily mean your efforts to become a homeowner are now that much more difficult.

Though the interest hike does affect how interest rates are offered, the rates for mortgages function independently and actually tend to fluctuate a lot more than the Federal interest rate.  Remember that various lenders each have varying rates of interest so if anything, you may just need to do a little more shopping around when you decide to apply for a mortgage.

Homeowners concerned about adjustable rate mortgages shouldn’t be too concerned as the bulk of mortgage originations in the past couple of years have been fixed-rate mortgages.  Those concerned about how interest rates may affect future adjustable rate mortgages can rest assured that the changes will not be too drastic.  Even if interest were to increase by one percent by the end of next year, it would likely lead to an interest rate of about four to five percent, which represents about $50 to $70 more per month in payments.

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