Did interest rates go up?
You probably saw the recent news on the Federal Reserve raising the Federal Fund Rate by 25 basis points (one quarter of a percent). But what does that mean? The small rate hike was anticipated, and is widely thought to indicate confidence in the US economy.
What does it mean for your home and mortgage?
Aside from home equity lines of credit, or mortgage products like an adjustable rate mortgages (A.R.M.) the Fed decision will not affect your current mortgage payment. For those consumers currently in the market for a new home mortgage the news shouldn’t come as a surprise, and its effect is only very small. On average, a new $300,000 mortgage will likely cost borrowers approximately $60 more a month. On the flipside, the stronger economy that led to the interest rate announcement probably means there’s a more stable and competitive work environment.
If we look to the past, rates are still historically low. Over the past 46 years, they’ve been at an average 8.25% — nearly double where they are today. The most recent change isn’t likely to prevent those in the market from purchasing, but continued increases will. What’s more likely to slow the housing market is the limited number of homes currently for sale. People who were on the fence about whether or not to buy or “move up” might start deciding to stay put. This potential trickle down effect is likely to continue to contribute to a lack of inventory.
Our SunCrest Market Update is a hyper-local analysis of the most up-to-date information regarding the SunCrest real estate market. The previous month’s SunCrest housing information and future editions are released monthly.
Earlier this month, our phones were buzzing with questions from clients wondering if mortgage rates would be impacted from the Federal Reserve’s decision to raise the key fund rate. “If only we had a crystal ball,” was what we found ourselves saying.
It’s important to note that home mortgage rates are not directly tied to the Federal Fund Rate. Revolving lines of credit, on the other hand (think: home equity loans or credit cards) are more closely related. Mortgage rates follow bond yields, specifically the 10-year treasury.
While we don’t have that crystal ball, analysts and economists from organizations like the Mortgage Bankers Association or government-sponsored funders like Fannie or Freddie are predicting that mortgage rates may increase gradually over the next year. Take a peek at the chart below for what they’re predicting.
FHA Loan Limits Increase Throughout SunCrest
Also this month, the Federal Housing Administration (FHA) increased FHA loan limits to both counties within SunCrest boundaries. The FHA loan limit for Salt Lake County is now $312,800 (up from $304,750) while Utah County is $303,600 (up from $293,250).
Our take: There’s no need to hit the panic button; in the big historical picture, mortgage rates are still very low. However, if you believe the predictions, then now is the time to buy and you’ll only pay more interest the longer you wait. We had also hoped the FHA limit changes would be more substantial, but there are still SunCrest homes available that fall in those guidelines, and can be had for minimal down payment.