Just recently, the Federal Reserve announced a 0.25% interest rate increase on its short-term loans. While the move was anticipated by real estate professionals and described as a gradual change, even incremental increases can have big impacts for the consumer.
Here are three things you should know about the rate increase and how it impacts your bottom line.
Window of Opportunity
Interest rates on the average 30-year fixed mortgage rose from 3.89 to 3.91 while the rate on 15-year mortgages rose from 3.16 to 3.18, according to Freddie Mac’s June 15th report. Although this increase follows on the heels of a seven-month low, experts say there’s still time for homeowners to refinance their mortgage and reap the benefit of low rates.
But the most important thing to know about the latest interest rate spike is that it’s one of many anticipated increases over the next year. Economists forecast that the interest rate will continue to climb on a quarterly basis by 0.25% and may be a full 1% higher at the end of 2017. While the rate increase speaks well for the strength of the US economy, it also points to a narrowing window of opportunity for consumers. If you’re considering refinancing your mortgage, you may want to capitalize on current rates sooner rather than later as they continue to climb.
First Time Challenges
The rate increase impacts current and future homeowners alike. If you’re a first-time buyer, the increase means you may encounter additional financial challenges. As loan rates rise and house prices drive forward, first-time buyers are encountering a 10% hike on monthly principle and interest payments from the same time last year, says NerdWallet’s Hal Bundrick. Interest rates are anticipated to increase throughout the year and first-time buyers, like current homeowners, will want to take advantage of the current rates before further hikes hit their wallet harder.
Although interest rates are expected to increase challenges to consumers, they may get help from an unexpected source: the credit bureaus.
Following a 2016 settlement between multiple state attorney generals and Equifax, TransUnion, and Experian, many individuals can expect to see a rise of as much as 10 points in their credit scores. Beginning on July 1st, many tax liens and civil judgments will be removed from credit scores by all three bureaus and offer increased credit opportunities – which could mean stronger refinancing or mortgage loans.
Financing options are just one of the many variables that current and future homeowners must contend with, but you don’t have to do it alone. The staff at Fishers & Geist Real Estate are available to help you understand how rate increases impact your bottom line whether you’re buying, selling, or on the fence. To find out more, contact us today.