Fed Holds Off On Interest Rate Hike Once Again
Two day conference produces no new rate hikes…for now.
Rates are always the hot topic, especially in the real estate community. And why? Well, of course it stands that home buyers stand to gain from lower rates that can improve their purchasing power. This of course, helps to drive sales, which benefits sellers. Even those who aren’t buying or selling can benefit from refinancing their home mortgage to a lower rate.
Why are interest rates so low?
Good question! In fact, historically we’re at about the lowest ever for interest rates. Who remembers being excited when rates dropped below 7 1/2 percent? Is there anyone out there who is old enough to have tried to purchase a home in the early 80’s when they reached nearly 20 percent?
Generally, when we talk about the Federal Reserve (or “The Fed” for short) raising or lowering rates, we’re talking about interest rates that lending institutions pay to borrow money that they then turn around to lend to consumers at a higher rate. By “consumers,” we’re referring to anyone who is NOT part of a lending institution; so home buyers, business owners, consumer loans, and other lines of credit obtained for whatever reason may be affected by the rates set by the Federal Reserve.
From their peak in the early 80’s, rates have steadily declined. Most of us were very happy to have rates once again at around 7 percent at the turn of this century, and were very surprised to see them drop even more. But they hit rock bottom (At or near zero percent as a borrowing rate for lending institutions) in 2008 as a way for The Fed to try and control what was an economy spinning out of control as a result of the recession that was sweeping across the world. With homes falling into foreclosure at an alarming rate, and lending institutions changing their rules in light of the subprime scandal, keeping rates low was one of the only control measures The Fed had at the time to try and boost the economy.
When will rates rise?
Since then, we’ve all lived under the big question as to how long this low interest love fest will last. The Federal Reserve’s recent decision to put off raising rates was based on what they saw as limited economic improvement here at home, with several warning signs abroad that there may still be lingering negative affects worldwide.
They did however conclude their decision with the notion that rates may rise as early as December of this year, or by March of 2016 at the very latest.
Don’t wait…Don’t delay!
These low rates won’t last forever. We also would STRONGLY advise not waiting until the end of the year to “see what happens.” If you’re on the fence about buying a home, NOW is the time to talk to us about qualifying for a home loan. The Elgin and Pilar Walker Team has nearly 30 years experience in the real estate industry, and are advocates for you and your opportunity to realize all of your real estate goals. Contact us today!