Feds may not raise rates at all this year

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blog-author-clayjeffreys3

Well over a year ago, the Federal Reserve indicated they would begin raising the Federal Funding Rate. This started in December 2015 when the rate increased by 0.250% for the first time in almost a decade. While we didn’t expect a 0.250% increase each time the Feds met this year, surely there would be another increase at some point. Right?

The year is almost over, and the Feds have stood their ground. The comments from the most recent Fed meeting made it sound as if it is doubtful there would be an increase this year, but could be in 2017 as the economy continues to reach employment goals.

Does that mean potential buyers should panic as rates may go up in 2017? No, it doesn’t.

  • The Federal Funding rate does not impact mortgage rates. When the Federal Funding rate increases, rates go up on second mortgages, credit cards, car loans, etc.
  • Mortgage Rates go up and down along with the value of Mortgage Backed Security Bonds. To see plenty of previous posts on this topic, do a search for “MBS” in the “search this site” box in the upper right corner of the page.
  • The last time the Feds raised the Federal Funding Rate, Mortgage Rates improved. Rates are roughly 0.500% lower now than they were in December 2015.

So what to make of this? Don’t make home buying plans on what the Feds may or may not do. Don’t buy a home out of fear of rates going up. The best strategy is to get prequalified to buy a home, and purchase a home when the time is right for you… and not what the Feds or media dictates.

Looking to buy a home in Georgia? Contact me today. I’ll get you prequalified and get you ready for your home buying experience.

 

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