Uncertain Certainty

Last week the Fed voted that they will be raising interest rates for the first time in nearly a decade. For years we have all been wondering, how low will rates go and for the last few months, when the rumors of an increase come to life? Last week the Fed ended that uncertainty. Over the next 3 years the key interest rate will raise from nearly 0% to 3.3%. Does this mean that interest rates for mortgages and personal loans are going to jump over night? The answer is no. The Fed has expressly stated that by enacting a gradual increase in rates over the next few years, they will prevent having to do a large overnight increase at some point in the future.   

Historically, the average mortgage interest rate in the United States is just over 7%. Over the next few years we will begin to see a gradual shift upward  in interest rates taking us closer towards that historical average. This means that for every $1,000 borrowed, a rate increase of .50% increases the monthly payment by $0.28. For each borrower and homeowner this will mean something different.

While I may not have a crystal ball about how things will play out, I can still say with a high level of confidence, now is still the time to finance or refinance your home and that any increase in rates will still keep interest rates at historical lows for the foreseeable future.