On Thursday, the US Federal Reserve raised interest rates 25 basis points to 5 percent. This is the highest that the short term interest rate has been in 5 years. How will this affect your mortgage?
Probably not much, at least not at first. While the fed was hiking the rate, mortgage rates on 30 year mortgages fell slightly last week. The average rate on a 30 year mortgage fell from 6.59% to 6.58%, the first decline after six straight increases.
The Federal Reserve interest hike is not expected to have a big impact on mortgages, at least for the foreseeable future. Analysts are predicting that the real effect of the rate raise will be felt by those consumers with credit card debt and car loans.
The decline in mortgage rates was attributed to last week’s unemployment report, which showed that just 138,000 jobs were generated in the US economy this quarter, much lower than was expected. However higher hourly wages were reported at their highest rate in five years.
What this means for the average homeowner is that low rates are still available to qualified buyers, and the real estate boom will likely be unaffected in many areas with strong growth and appreciation in housing prices. Mortgage rates are affected by the Federal Reserve, but they are also sensitive to other economic indicators.
Rates may no longer be at their absolute lowest, but they are certainly still at attractively low rates. But please, pay off the credit cards and the autos and the other consumer debt. Doing so may well result in raising your credit score, which will qualify you for the best interest rates when it comes time to apply for that mortgage.