In other words, if the cost of borrowing will be higher tomorrow, why not take out that mortgage today and get more bang for your buck? “But it’s a sign the seasons are changing”.
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The 30-year fixed mortgage rate on Zillow® Mortgages is currently 3.75 percent, up one basis point from this time last week.
“Just because the Fed starts to raise interest rates doesn’t mean those terms are going to land in savers’ laps automatically”, McBride said. One increase “doesn’t mean the second will be on its heels”.
But, for banks, what the Fed projects about where rates will be at the end of next year may be far more important. Here is what a boost in rates will mean for your finances.
Interest rates are one of the most important drivers of bank earnings.
Right now, banks are giving savers a mere 0.47 percent on savings and money market accounts, according to Bankrate.com. To prop up those interest margins, said McBride, banks will likely hike lending rates while leaving rates on CDs and other deposits pretty flat going forward.
Borrowers with variable-rate debt: Naturally, the impact of any move by the Federal Reserve will be most apparent on loans that are pegged to benchmark interest rates.
Over at Chase Mortgage, refinance rates for the 30 year fixed mortgage are the same at 4.00%, and the 15 year is unchanged as well at 3.25%.
Payments for adjustable-rate loans may tick up, since those reset based on short-term rates, but that doesn’t necessarily mean switching to a fixed-rate loan is a slam dunk.
Home sellers: Though it’s a bit counterintuitive, higher interest rates could actually be good for home sales at the beginning of any period of rate increases.
10 year fixed rate loans have been offered at 2.875% and an Apr of 3.058%. If you have good credit, consider consolidating private student loans into a fixed-rate loan, said Mark Kantrowitz, senior vice president and publisher of education resource site Edvisors.com.
Murphy believes this shows borrowers are becoming aware that ultra-low rates have a “limited lifespan” as interest rate rises edge closer.
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Ward recommends against trying to predict the timing and pace of Fed moves or making big shifts in your portfolio as a result. With financial markets settling down from the jitters of the past few weeks, the demand for the safety of U.S. government bonds eased somewhat, with yields moving higher.
