Everything seems to be getting more expensive, and now the Federal Reserve is raising interest rates in an attempt to curb record inflation.
“The Fed is raising interest rates, they’re raising the short-term prime interest rate, which is kind of tied to your credit card rates and your home equity lines of credit,” Chris explained. Orsini, Pacific Trust Mortgage Regional Manager & Mortgage Banker.
Orsini says 30-year fixed mortgage rates aren’t directly affected by the Fed’s hike in short-term rates.
But if you’re considering refinancing your home, now is not the right time.
“While rates now at 6%, or wherever they are now, are historically low, they are certainly higher than they have been in recent years,” Orsini said.
It’s not all bad news for people looking to buy a home, though. Orsini says that even if they buy a house with a high interest rate now, they could refinance at a lower rate in the future.
“Well, it’s probably going to slow down home buying a bit because it lowers people’s purchasing power because when interest rates go up, their payments go up,” he said.
Keller Williams Central Coast Realtor Rick Cook says he has many clients who have been affected by rising interest rates, with one client having to cut his price range significantly.
“With the rate going up, it went from being worth $550,000 in purchasing power to less than $440,000,” Cook said.
Cook predicts there won’t be any drastic changes in the housing market, but it will likely dampen demand a bit.
“It’s just going to slow the housing market down a bit and so that’s what we’re going to see,” Cook said.
Cal Poly economist Daniel Seiver says a lot of things are poised to push the price up.
“Almost all types of credit are going to get more expensive. If you want to buy a car, your payments are going to be higher,” he said.
Seiver says the Federal Reserve is not done raising rates and they will likely continue to rise.
“So almost anything you want to borrow money for will be more expensive,” he said.
Seiver says all federal loans have fixed income rates, so it won’t affect them, but private loans can have variable interest rates, so the federal increase could affect them.
He adds that rising interest rates probably won’t have a full impact on the economy for another six months, and he predicts that if we were to have a recession, it probably won’t happen until next year.