Impact of an Interest Rate Increase

A couple of months ago, the country experienced the largest gains in U.S. consumer prices in five months due to huge increases in rents and gasoline prices. Such factors will impact inflation, leading many Economists and Wall Street pundits to conclude that the Federal Reserve will likely increase interest rates in December. According to an online article published by Mortgage Banker Association on October 19, 2016, "The Market Composite Index, a measure of mortgage loan application volume, increased 0.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 9 percent compared with the previous week.”

Options to Consider

In anticipation of a rate increase in December, volatility as well as a surge in new mortgage applications and refinancing is expected. Should the rate increase come to fruition, no advanced action is required for homeowners with an existing fixed-rate mortgage. This is because fixed-rate mortgages are directly linked to the 10-year Treasury bond, which is influenced by indicators like long-term national and global economic growth. In contrast, homeowners with an adjustable rate should consider taking a more proactive approach, since adjustable rates will be immediately impacted if a federal rate increase occurs. If the bank's fees are negligible and/or you will benefit from a lower rate, homeowners should consider contacting a financial institution to discuss their options such as refinancing from a variable into a fixed rate. Credit Unions are great alternatives, since as non-profits; they typically have a lower rate than traditional banks.

For individuals who are pre-approved for a mortgage or planning to submit an application, Cosmopolitan Real Estate has a team of available real estate experts to help you find your next home. We specialize in a variety of neighborhoods such as Medford, Malden, Woburn, Arlington, Winchester and surrounding cities in Greater Boston. In addition, our website offers a variety of additional online resources such as a home valuation tool that are available at your convenience. We can also be reached by phone at 339-221-5412.