Why mortgage rates are NOT going up now, but…

23 Dec 2015 | Author: | No comments yet »

A Consumer’s Guide to the Fed Interest Rate Hike.

Currencies of nations linked to commodity exports tumbled as crude oil reached almost its lowest level since February 2009, one day after the Federal Reserve’s decision to boost interest rates. WASHINGTON – Average long-term U.S. mortgage rates rose slightly this week in the days before the Federal Reserve announced a historic increase in its key short-term interest rate.Interest rates on home loans are expected to move higher throughout the coming year following Wednesday’s announcement by the Fed that it was raising its benchmark rate.

The 30-year, fixed-rate mortgage was issued, on average, at 3.97% — with an average 0.6 point — for the week ending Dec. 17, up from 3.95% a week earlier, according to the latest Primary Mortgage Market Survey by Freddie Mac released Thursday. Economists have largely seen this as a positive development – it means the American economy is considered strong enough to handle higher interest rates – but, of course, the all-important question on everyone’s minds is likely: What does this mean for me? You have an opportunity here in the next six months to take advantage of still very, very historic low mortgage rates,” said Emerson, also chairman of the Mortgage Bankers Association. “Based on what … [the Fed] telegraphed, we don’t really see a significant shift in 2016.” Central bankers indicated four rate hikes next year.

The government-backed mortgage finance company aggregates current rates weekly from 125 lenders from across the country to come up with national average mortgage rates. Exporting nations have been hurt as commodity prices have fallen 27 percent this year, the most since 2008, as a glut in supply meets slowing demand for raw materials amid patchy global economic growth. While it’s expected that the minor interest rate hike will result in it being more costly to borrow money to buy a home, that isn’t necessarily the case. Numerous factors influence mortgage rates, from where in the country your home is located to the state of the global economy to whether inflation is believed to be around the corner.

But, he added, “that doesn’t solve the yield drought that’s been going on for seven years.” The Fed has no direct influence on the prime rate or the deposit rate, although both tend to be correlated to changes in the target federal funds rate. They’re pretty much in the same place they were 12 months ago,” Emerson said, despite the Fed’s “over-telegraphed move” of a quarter of a percentage point increase in the fed funds lending rate. Yellen, citing the economic recovery that “has clearly come a long way.” The Fed is expected to raise rates modestly and gradually, wanting to ensure the economic upturn is sustainable.

The 15-year fixed-rate mortgage increased to 3.34 percent from 3.27 percent this week, while the 5/1 adjustable was virtually unchanged at 3.42 percent, according to Bankrate. “If you’re in an adjustable rate, floating mortgage, and thinking about getting out of that, now is exactly the time to do that,” Emerson said, while reminding homebuyers that adjustables have been a great deal in recent years as the Fed kept the funds rate near zero percent since December 2008. And mortgage rates “will tick higher but remain at historically low levels” next year, says Sean Becketti, chief economist for Freddie Mac, in a statement. The Fed policymakers coupled the hike with a signal that further increases likely will be made slowly, as the economy strengthens further and inflation rises from undesirably low levels. We are likely to see some short-term volatility in fixed-income markets as market participants adjust to these new tools.” The market composite index — a measure of total loan application volume – decreased 1.1 percent from the previous week. Abnormally low rates can have adverse consequences – especially for savers that may seek out investments that could be too risky in pursuit of a higher return.” Technically, the rate hike is great news for investors.

But a quarter-point interest rate isn’t going to make you wildly rich overnight, and many experts have already been cautioning that profit-hungry banks may take their time raising yields on savings accounts. “In light of the anticipated interest rate increase, consumers should consider opening up a savings account for the upcoming year or continue saving,” she says. “They should make it a point to put away money such as bonuses, holiday money or birthday money into a separate fund.” Loans. On the other hand, the Fed telegraphed the rate increase enough that if the hike hadn’t happened on Wednesday, it’s easy to imagine that news might have rattled investors as well. Robert Johnson, president and CEO of The American College of Financial Services in Bryn Mawr, Pennsylvania, thinks investors shouldn’t be rattled but simply adjust to the new environment. For instance, he suggests considering investing in stocks that perform well in rising-rate environments. “While it is true that stocks in general do much better when interest rates are falling than when rates are rising, some sectors perform much better when rates are rising,” Johnson says. “During falling-rate environments, consumer-discretionary industries such as apparel, retail, automobiles and durable goods are top performers.

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