Mortgage rates not likely to skyrocket after interest rate hike


Mortgage rates not likely to skyrocket after rate hike

Duncombe said it is crucial that homeowners act now to secure a low rate while they’re still available.

Mortgage rates don’t move in lock-step with base rates set by the Fed.

While short-term interest rates certainly do affect the market for 10-year Treasury bonds, they are far from the only factor.

“I wouldn’t be surprised if, overall, we start to see more of a cool down”, Gudell said, “that I think is actually a good thing for a lot of these coastal markets”.

“As interest rates go up, we expect home prices will come down eventually”. A quarter-point increase on a 30-year fixed-rate mortgage for $250,000 means another $40 in payments every month, according to the National Association of Realtors.

As for how this works, think of the bottom range as the push and the top range as the pull that gets the Fed’s Effective Funds rate, which is used by banks to lend to one another, into the middle of the band. By taking advantage of a 0% balance transfer offer, for example, you’ll be able to pay off your balance without worrying about the recent rise of interest rates.

Savings accounts – Because rates have been low for so long savings accounts have not been accruing as much money as they can with a higher interest rate.

The average fee for a 30-year mortgage was unchanged from last week at 0.6 point.

Consumers should not rush to buy a house just to get a slightly lower mortgage rate, said Greg McBride, an analyst at, a consumer financial website.

Commercial real estate, such as office towers, is usually financed with longer-term money such as 3-year to 10-year financing and so is not priced on short term interest rate movements.

Having said that, if the Feds continue to increase interest rates for a second or third time in the near future, then mortgage rates are more likely to increase as well.

For anyone considering whether to buy a home or auto, the Federal Reserve’s interest rate increase last week shouldn’t make much difference. “Even if you have marginal credit, it’s not going to be a problem”.

This is one reason why some analysts feel mortgage rates will rise in 2016.

Disclaimers: This story contains forward-looking statements about the mortgage industry and the broader economy.

“The average SVR in December 2008 sat at 5.68 per cent while today it stands at 4.82 per cent, but borrowers who are anxious about rising interest rates should look to secure cheaper deals now: two-year fixed rates today can be as low as 1.14 per cent while five-year rates can be found at 2.19 per cent”.

Also, Americans with adjustable-rate mortgages will probably face a higher rate at the date of their next adjustment.

The Fed’s official press release tells us that “economic activity has been expanding at a moderate pace”, “household spending and business fixed investment have been increasing at solid rates, and the housing sector has improved further…” And that, in turn, is meant to prod banks to boost certain other rates.

That’s why many financial experts expect a slow rise in interest rates over time. The challenges will emerge in those markets and price points that are most dependent on financing and sensitive to rates-that is, where the buyers are carrying a heavy debt load and have a harder time getting a loan.


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