How rising interest rates could affect homeowners | #RisingInterestRates #TalkToYourAgent #SiliconValleyAgent #YajneshRai


How rising interest rates could affect homeowners | Saturday Business |

These days, all potential homebuyers are thinking about rising interest rates.

Why? Because, the Federal Open Market Committee, or FOMC, just voted to raise short-term interest rates in early March, and the market is anticipating additional increases in 2017 and 2018.

It is important to understand that longer term mortgage interest rates are not directly set by the FOMC, but they are indirectly affected by the decisions of the committee members, who are members of the Federal Reserve Banks.


The goal of the Federal Reserve System is to manage monetary policy, creating an equilibrium of supply and demand that signals a healthy economy and market stability. They want to avoid significant inflation or deflation by setting targets and taking action on short-term interest rates to promote stable prices.

These short-term rate changes are much more likely to impact you through higher credit card interest rates, car loan interest rates and the prices of other goods and services. What should you be considering in this raising rate environment?

One of the most important factors is how long you intend to own a home. Most home buyers in our local market will either move up to a larger home or move away within the first five to seven years. Many prospective home buyers do not realize that an adjustable rate mortgage might offer them a pretty significant initial savings over a long-term fixed rate mortgage loan. That may seem counterintuitive in a rising rate environment but it can be a great choice if you know you’re not going to be in your home long term.


If you own a home already and previously locked into a long-term fixed rate mortgage, there are several other ways that an increase in short-term interest rates can affect you. If you have a home equity line of credit, it is usually tied to the published Wall Street Journal prime rate, which is directly impacted by the movements that the Federal Reserve is projecting.

The most important thing to remember is that, even with these rising rates, mortgage rates are still incredibly low. Just like any major financial decision, financing your new home is one that should be researched and customized to fit your unique situation and budget. I highly recommend you figure that part of the equation out with a local lender before you even start shopping.

Deborah Graves is a senior vice president at Central Bank of Boone County, where she manages the mortgage loan department. She has been with the bank for more than 20 years.


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