Federal Rate Hikes and the Mortgage: What You Can Do

No news is good news, and we’ve got news. For those of you who have been hiding under the desk with the wastebasket over your head, the Federal Reserve agreed that the economy is healthy enough to sustain an interest rate hike of one-quarter point or .25 percent. There’s been some dramatics over it, with Wall Street having a minor tantrum, but the overall effect remains to be seen as the banks are weaned off the policy of free money. The federal rate hikes may not be done yet. There could be more coming in 2016 and into 2017. There’s going to be a lot of second guessing and talking head activity, but what concerns most people is the effect that this could have on interest rates for their credit cards, student loans, and mortgages.

Inflation Anxiety

Rate hikes are a method of controlling inflation, which, while it has been low, is nonetheless a factor in our daily lives. It’s a safe bet that if you’ve gone out for a cheeseburger or some Popeye’s, that you’ve noticed that a combo is still the same size, but your wallet’s taking a hit. That means you’re getting the same burger, fries, and soft drink, but your money is actually buying less than it did before so the prices has gone up. It’s not a weak dollar, it’s just that the buying power of the money you have is weaker.

Consumer Anxiety

Here’s the thing – fixed rate mortgages are just that. They are not going to move higher or lower based on the Federal Reserve’s lending rate. Adjustable rate mortgage holders are not going to see an immediate effect, but you need to check your paperwork to find out when your reset date rolls around. After that date, you might be seeing a big change and some more frequent ones. You might be getting a big push to BUY A HOUSE NOW, but at most the current rate hike will add about $1,050 per year to a the payment on a $300,000 house with a 4.5 percent 30 year fixed rate mortgage. Right now the Florida average interest rate for a 30 year fixed rate 3.97 percent and 3.5 percent for a 5/1 adjustable rate mortgage.

Foreclosure Anxiety

However, if you are on the edge in terms of finances, the thought of any extra money can send you into an anxiety attack. Right now, the foreclosure rate for Broward Country is more than twice that of the national foreclosure rate. A little over 1,500 homes entered foreclosure in November, though that is half the number of this year’s highs in March and May. In Fort Lauderdale alone, one out of every 508 homes is in foreclosure. If there is a chance that you may be facing foreclosure, you need to get in touch with us sooner instead of later. There are a lot of ways to fix a financial mess before the situation gets any worse.

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Published by
Chad Van Horn

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