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The Fed Rate Hike: Laymans Terms

Photo by DNY59/iStock / Getty Images

Photo by DNY59/iStock / Getty Images

I'm sure many of you have heard that the Federal Reserve decided to release their grip on the historical low interest rates. Essentially since the recession they've been at 0.00%. After other factors get included that left many people purchasing homes with a rate between 2.85% and 4% over the past 3-4 years. Insanely good rates considering a healthy market has rates around 5.5%-6% and over the past 30 years we've seen rates get up to 20% in the early 80s. 

So, does this change mean that we'll see those rates get to 5.5%? The easy answer: not yet. Rates on conventional loans may see a small immediate increase (4.25% or 4.185%) but FHA and government insured loans will stay around 4% for the time being. By this time next year they may be closer to 4.75-5%. Still a great rate. What will see an immediate impact are things like your credit card interest rate and car loan rates. Those will jump in a month or two. 

All of this being said, it makes 2016 a great time to buy before we see rates get into the 5% range in 2017 and beyond. It's also a great time to pay down that small debt that you've been sitting on before the rates on those cards jump!

Overall the release on rates is a good sign that our economy is improving and just like the past 3 years, we expect the housing market to improve as well.

Hopefully this was helpful and if you have more questions we are always just an email, phone call or comment away!