On June 13th, the Fed made it's second discount rate hike of 2018 while announcing that two more rate hikes were likely this year. The last time the Fed's discount rate was this high was in the summer of 2008. This trend is in response to a growing economy, increasing wages, and employment, and intended to tamp down inflation concerns, on the whole, great problems to have. But these increases will cause increases in credit card, home equity loan, and of course, home mortgage loan interest rates. Here are the takeaways:
Home purchasers - this trend will continue. If considering a purchase, don't wait expecting or hoping for rate decreases. There will be minor adjustments up and down daily, but holding out for a substantial rate reduction is a bad strategy. Work with a trusted loan officer for advice on when to lock in your rates.
Home sellers - regarding your home's market value, increasing wages, employment, and overall optimism tend to drive home prices up. But rising mortgage rates tend to stagnate home values. Whether your home value will benefit or not from these opposing forces will depend more on the local economy and housing market. Our advice is to ignore Zillow's zestimates. They rarely represent market value. Work with your Realtor for studied comparative market home values for correct pricing.
For our readers with homes financed by VA loans, our next post will discuss the tremendous value of your low interest assumable VA loan in an increasing interest rate environment.