June 16th, 2018 8:04 AM by Jackie A. Graves
If you’re looking to Refinance
or Buy a Home
click here before rates rise.
Reserve lifted the
federal funds rate on Wednesday by a quarter percentage point
to a range of 1.75 percent to 2 percent. Two more rate hikes are expected this
If you’re a
homeowner with a fixed-rate mortgage, rest easy. If you’re a homebuyer
and are shopping for a fixed-rate loan, don’t panic. But if you have an
adjustable-rate mortgage or took out a home equity line of credit, pay
and HELOCs will be more costly
with adjustable-rate mortgages that are past the fixed-rate period or home equity lines of credit can
expect to see higher rates very soon.
what we know about the recent past and on what we expect, we know that we’re in
a rising interest rate environment,” says Mark Hamrick, senior economic
analyst at Bankrate. “That means anyone, including those who have
adjustable-rate mortgages and HELOCs, which tend to be variable, will be facing
higher payments in the future (if they haven’t been already).”
These loans are
typically tied to the prime rate. When the federal funds rate changes, the
prime rate does as well. That means a quarter-point Fed increase means a
quarter-point increase on HELOCs within the next couple of statement cycles.
course of action for HELOC and ARM borrowers is to prepare for refinancing.
That might mean actively improving your credit score or working with a
financial institution. The sooner you refinance out of adjustable-rate loans,
the better for your bottom line, Hamrick says.
being focused on the precise number of rate hikes, most consumers, borrowers,
savers and even investors would be well-advised to be aware of the likely
direction of rates, meaning higher, and to prepare and act accordingly,”
on longer-term mortgages to gradually rise
rates on 15-year and 30-year fixed-rate mortgages don’t move in lock-step with the federal
funds rate. These loans are tied to 10-year Treasuries, so borrowers looking to
get a 30-year mortgage aren’t directly affected by the latest Fed hike.
federal funds rate does contribute to the longer-term trends of the 10-year
Treasury, and long-term fixed mortgages as a result. With the Fed likely
lifting rates multiple times over the next couple of years, the trend for
long-term mortgage rates is up.
predict that the Fed’s rate hikes, along with a strong economy and growing
deficits, will push the average 30-year fixed mortgage rate to 5 percent in the
next couple of years. It would be the first time it’s hit the 5 percent mark
since April 2011, according to Bankrate data.
Reserve officials say is true: Every meeting is live, meaning they can make a
rate change almost any time, but they also don’t want to shock markets, unless
facing truly extreme circumstances,” Hamrick says. “So they will continue to
try to provide some degree of guidance regarding future likely rate moves,
particularly going out about three years. For the foreseeable future, the Fed
is telling us that we should brace for a continued rising trajectory of rising
are on the fence about getting a mortgage should act sooner rather than later
to make sure they get the lowest rate possible.
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