What Rising Interest Rates Means for Homebuyers.The Federal Reserve announced today that interest rates will increase by 0.25 percent, or 25 basis points.
The last time the Fed raised rates, “the iPhone didn’t even exist,” says Mark Fleming, chief economist for title insurance company First American Financial Corporation.Interest rates in the U.S. have been close to zero for the last seven years, intentionally kept low to allow employment and the market to recover from the crash in 2008.
For new homebuyers, the expectation of a rate hike spurred many to buy in the months leading up to the decision and encouraged a cycle of refinancing from existing homeowners.
But the moderate rate increase does not spell doom if you're looking to buy a home – in fact, it may give you the push you need to get out there and buy your home before interest rates rise again, something economists are predicting for 2016.
How will rising interest rates affect you as a homebuyer? U.S. News asked experts to weigh in on whether you should be concerned about your ability to afford a mortgage and what you should know about interest rates in the next year.
The Fed’s decision doesn’t affect your interest rate as much as you may think. While the interest rate policy changes will affect how interest rates are offered, mortgage rates function separately, and are in fact far more volatile than the Fed’s interest rate.
Jonathan Smoke, chief economist for realtor.com, explains rates for new fixed mortgages not only fluctuate on their own, but have changed in anticipation of increased Fed interest rates, without any actual change in policy.
