Last week the Federal Reserve raised interest rates by 0.25%, from 0.75% to 1%. Such movement by the Fed can typically place pressure on mortgage interest rates homebuyers apply for. However, since this increase was well anticipated by most of the markets, the general thought among most financiers is don’t expect any significant change in the current mortgage rates now. However, as the year progresses rates will likely continue to slowly rise. This will apply pressure to buyers to pull the trigger to purchase a home sooner than later. Especially first-time homebuyers.
As reported by multiple financial media outlets (i.e. Bloomberg News, CNBC, CNN Money, etc.) The Fed implied such future gradual rate hikes will be dependent on the economic outlook, unemployment figures, as well as income growth. Of course, rising interest rates can negatively impact real estate markets as we know, but with positives signs of economic recovery continuing, low inventories, and increase demand for homes, the question is going to be how much will the negative impact be from gradual rate increases?
To keep the recent Fed rate increase in perspective, you can view it this way. If you’re planning on purchasing a home with a $300K mortgage, a single percent difference from 4-to-5% means your mortgage payment will rise from $1,432 to $1,610. Last week’s increase was 0.25%.