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Rates to Stay Low – but Pay Attention

The Federal Open Market Committee recently met again and released its usual report on the state of the economy – and it’s mostly good news. Certainly, for anyone who lived through the economic crisis of a few years ago, the present day is paradise: Oil prices are super low, employment numbers continue to improve, and people are buying a lot more stuff. All of that translates into some seriously optimistic numbers. The sole downer in the whole report, in fact, is that the housing market continues to be a bit sluggish.

Near Zero

In fact, the Fed seems pretty happy to keep interest rates down near 0% as they have been for years now, which continues to be good news for everyone involved in real estate and mortgage lending, because it means mortgage rates will remain in the 4% range. The Fed sees the economy pretty balanced, but it also thinks inflation and prices should go up slightly for a really healthy picture, so it’s going to stand pat on those low rates for now. And that’s great news if you’re in the market for a new mortgage or for refinancing an existing loan.

But… Pay Attention

Yes, rates have been consistent for a long time, but the fed can decide to raise them, even dramatically, any time they want to. If inflation starts to rise faster than expected, the first step the Fed will take, in fact, will be to raise those short-term interest rates.

Let’s face it, rates can’t get much better. Waiting to try and eke out an extra eighth of a point exposes you to the risk that rates will jump overnight and you’re suddenly paying 5% and ruing the day you hesitated.

Remember, throughout history there have always been people who thought the good times would never end. We’re obviously nearing what should be the end of a traumatic economic time for this country and this economy. Strangely enough, stability and prosperity will bring higher interest rates and more expensive credit. The basic lesson here is, enjoy these low rates while you can – because they can’t, and almost certainly won’t last.

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