A couple of weeks ago, it seemed that you couldn’t open a website or turn a newspaper page without hearing all the buzz about the upcoming decision by the Federal Reserve on the key interest rate. “It’s going up” – “It’s staying the same” – it’s not like there were a lot of options, really. But media being what it is meant everyone shared their opinion as they jostled for position at the top of the search engines. (Not-so-much-of-a-Spoiler-Alert: The Fed announced September 17 that rates would not change.)
So for the time being, the interest rate stays near zero – as it has since early in the financial crisis in December 2008. Or at least until October or November of this year- as the Fed committee still has two more meetings to go – so it’s possible things could change before the end of 2015.
But what exactly does that mean when it comes to mortgage loans? If you’re currently searching for a home, or planning to in the near future, you more than likely already know that interest rates have a huge effect on your financial ability to buy a home and qualify for a mortgage.
So we’d just like to shed a little light on the answer to that question and say that it depends: Are you a glass half-full, or a glass half-empty kind of person?
On the “half-full” side, conventional wisdom indicates that mortgage interest rates won’t be seeing a huge change anytime soon. Because even if the Fed increases the interest rate before 2015 is ushered out, such an increase is anticipated to be small (a maximum of about .25%).
It does, however, open the door for additional interest rate hikes in the months to follow. But the good news is that because rates are still currently very low, it may take a year or more for such slow, incremental increases to cause any noticeable impact on the mortgage industry overall. In other words, the rate on your new mortgage loan isn’t going to change overnight.
On the flip-side – for those “half-empty” personalities, the decision by the Fed not to raise the interest rate reflects a U.S. that has not yet fully recovered from the financial crisis. While projections call for employment to continue to rise and the economic growth outlook is improved, concerns about global economies play an important role in the decision-making process. Because in many ways, what the Fed does plays a role in trade, currencies, and commodities on the world stage.
In truth, a rate hike by the Federal Reserve can have both positive and negative results. On the upside, the housing market itself can gain additional momentum simply based on the anticipation of such a hike, as home buyers get off the fence and make the decision to buy now so they can lock in low mortgage rates. Conversely, if such a rate hike hurts other economies in the world, that can ultimately impact U.S. trade and economic growth.
It’s a fine line to be sure. And it’s a call with enormous impact that reaches far beyond our borders. But the current decision, in our opinion, is a great one for the mortgage industry – and for anyone looking to upgrade, downgrade, or buy their first home.
Premier Mortgage Lending, NMLS #393282, is located at 701 N. Green Valley Pkwy., Suite 125, Henderson, 89074. The full-service lender is a member of the Las Vegas and Boulder City Chamber of Commerce, Better Business Bureau and Southern Nevada Home Builders Association, as well as an affiliate member of the Greater Las Vegas Association of Realtors.