Fed: Rates Increased for Second Time This Year
As predicted by all officials, the Fed raised rates for the second time in 2018 - up .25%. The remainder of 2018 and 2019 may see more gradual hikes, with analysts predicting two more increases by year’s end in order to curb future inflation concerns following reports of a strong labor market and economic conditions.
The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.
Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford to buy will decrease if you plan to stay within a certain monthly housing budget.
With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5%. Experts predict that mortgage rates will be closer to 5% or above by this time next year.
The impact on mortgage rates? The cost of borrowing may continue to rise from the current average of 4.54 percent for a 30-year fixed rate mortgage
Act now to get the most house for your hard-earned money.
“We are still in the middle innings of rising interest rates; consumers should expect another three or four rounds of interest rate increases over the next 18 months” said Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), in a statement. “Mortgage rates will consequently continue to nudge higher
- Interest rates are projected to increase steadily heading into 2019.
- The higher the interest rate, the more money you end up paying for your home and the higher your monthly payment will be.
- Rates are still low right now. Don't wait until rates hit 5% to start searching for your dream home!