Interest Rates on the Rise?

Anyone involved in the real estate industry knows that interest rates are currently near historic lows, which makes sense—the government does not want to slow down spending in a sluggish economy. There has been speculation for months that the Fed would raise rates (it has to happen eventually) based upon the health of different sectors of the economy. This speculative waiting was put to rest (at least for a moment) on Wednesday (4/27/16) when the Fed announced that it would not be raising its benchmark rate yet. The Fed wants its monetary policy to remain “accommodative, thereby supporting further improvement in labor market conditions”, providing continuing hope for the recovering housing market.

Although the Fed has not changed its rates, Freddie Mac’s Mortgage Rate Survey showed a jump from 3.59% to 3.66% from last week for the average 30-year fixed-rate mortgage. This is a climb from all of April, but no need for alarm. March had higher rates and February spent most of the time right around the 3.66% figure. Last year at this time the average rate on these loans was 3.68%. So disregard any alarmist articles or discussion about the significance of this rate jump.

So what does all of this rate talk mean for the housing market? Well, lower rates tend to free up investment. Some analysts have praised the Fed’s decision, noting that unemployment figures are not yet ideal and the low rate policies have been working. And although mortgage rates have climbed over the last week, they are far from high. We will keep an eye on this situation and report back with any updates, but for now rates do not appear to threaten the housing market.

For questions or clarifications, start a discussion in the comments section or contact the author at: cody@adhischools.com