Is It Time To Buy A Home Before The Rates Go Up

Dated: 07/01/2015

Views: 1343

More On The Fed

As we have discussed, the Federal Reserve Board is moving closer to raising interest rates. We have mentioned several times that the Fed controls short-term rates directly and influences, but does not control, longer-term rates. This topic is important to understand as we watch the economy this year. The Fed sets the "Discount Rate" which the Fed charges member banksto borrow funds in the short run when they are short of reserves. The Fed also sets a target for the "Federal Funds Rate" which is the rate banks charge each other for short-term borrowing.

Without getting into too much technical detail, these are very short-term rates. Thus ,when the Fed moved both rates to near zero as a reaction to the recession, rates on short-term instruments, such as six month treasuries, moved close to zero as well. Long-term rates moved down as well in reaction to the same forces that caused the Fed to lower short-term rates. Why is this important? This is important because the Fed is likely to increase short-term rates shortly.

And many are thinking that long-term rates, such as rates on home loans, will move up automatically. Well, rates on home loans have already moved up from their low levels of this winter in anticipation of this move. Therefore, when the Fed moves rates up, if the markets feel that this is the only move coming for the foreseeable future, long-term rates may not move at all. On the other hand, if the economy keeps getting stronger, long term rates will continue to move up regardless of what the Fed does. As a matter of fact, if the markets feel the Fed is not moving quickly enough, rates could move up even faster because nothing spooks the markets more than the specter of inflation.

 

Blog author image

Carolann Newton

I was a domestic paralegal for 8 years prior to Real Estate. Since I have been in Real Estate I have grown to love this business, even though it does have it's challenges; it is very exciting. There i....

Latest Blog Posts

DONT LOOK WHERE YOU DONT WANT TO GO

DON’T LOOK WHERE YOU DON’T WANT TO GO Are you familiar with the idea that we tend to attract more of what we focus on? Here’s a great story that perfectly illustrates this concept.

Read More

5 Disasters That Always Leave New Homeowners Clueless

5 Disasters That Always Leave New Homeowners CluelessLike what to do when a tree falls. Read Visit houselogic.com for more articles like this.

Read More

Fall For Greenville Music Line Up

Are you headed to Fall for Greenville this weekend? The link below will provide you the musical line up! So thankful the bad weather is behind us and everyone can enjoy this amazing event! :

Read More

12300 Indian Mound Road Ware Shoals SC

29692 - Updated Sept 2018!! - New kitchen counters and appliances! Original wood flooring reconditioned throughout the house. All rooms freshly painted! Wrap around porch with new floors and new

Read More