The Federal Reserve decided today to leave interest rates unchanged in its goal of continuing to stimulate the economy.
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“This increase in rates will lead to a reduction in refinance activity”.
As for savers, it’s tempting to think that any Fed action to increase interest rates would mean a better rate of return for your nest egg at your local bank. It’s not like, when it got sold, those guys where like, you know what?
The Federal Savings Bank reminds prospects that while rates are low, home prices are rising
due to limited supply and high demand.
“Interestingly, for Americans who are looking to purchase a home this year, mortgage rates are not the primary concern”. But if it’s variable, expect to see an increase.
Smoke says just a 50 basis point increase in home mortgage interest rates – for example, from 4% to 4.5% – would increase monthly payments 6% on new mortgages, while causing a 7% rejection of loan applications.
Does that mean dealing with higher rates will be easy?
2) Your mortgage could go up – unless it’s fixed – If you have a fixed-rate mortgage, you’re golden.
But it’s hardly like the United States is teetering on the edge of another recession if the Fed edges rates up by 0.25 percentage points. Since rates have been so low, most mortgages have been fixed for the duration of the mortgage term.
He predicted that the rupiah exchange rate could touch the level of Rp 15,000 per United States dollar if the Fed increased its interest rate. The median Fed forecast says 2018.
From Freddie Mac’s weekly survey: The 30-year fixed was largely the same, moving just 1 basis point more expensive than last week’s 3.90 percent, landing at 3.91percent. “Given these expectations of falling fixed rates, mortgage holders who choose to only fix for less than one year are likely to be able to lock in an even lower rate in the first half of 2016”, he said.
Right now, banks are giving savers a mere 0.47 percent on savings and money market accounts, according to Bankrate.com. The central bank’s board was concluding a two-day meeting, where they were considering raising the short-term rate.
This so-called zero-interest rate policy (ZIRP) was introduced by the Fed in December 2008 in its effort to stimulate growth and inflation in the wake of the financial crisis. “I am part of the #JustGoForIt crowd in the financial world-there is no reason for the US economy to be at an emergency interest rate policy”. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. This decision comes in the wake of a recent stock market correction.
Hovland added that a rate hike will come sooner rather than later, even as early as next month, though he noted it would depend on “how the markets react in the next few weeks”.
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“If it seems possible that the Fed will start hiking rates quickly and sequentially, as it always has done in the past, then consumer and investor confidence might be sunk and spending and investing could halt”, Greene said.
