What Will Happen If Interest Rates Go Up?

The Fed is expected to increase interest rates in mid-December. How will this decision affect our local real estate market?

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Over the past few months, there has been a lot of buzz about a possible interest rate increase from the Federal Reserve.

First, experts said that the Fed would raise rates in September, but that didn’t happen. Now, everyone expects that rates will increase in mid-December. However, no one knows how much rates will go up.

Rates recently went up as a result of post-election moves made by investors, which gave the banks a chance to bump rates prior to the Fed doing so.  

Even if rates go up, they will still be historically low.

Personally, I think the moves by the Fed are nothing to worry about. This is just another case of people getting nervous while waiting for the test results. If the Fed increases rates, our market will not be affected in a major way. There are three reasons why:

1. Mortgage rates often move independently of the Fed’s rate. An increase in the Fed rate might actually lead to a decrease in mortgage rates. In fact, that’s what happened back when the Fed raised rates in December of 2015.
2. Any increase in rates will probably be small. If the Fed raises rates by a quarter of a percent and mortgage rates increase by the same amount, interest rates will still be historically low.
3. The Fed is concerned with the current shortage in housing inventory. As a result, they will keep the health of the real estate market in mind before taking action.

In short, the real estate market is doing great right now, and it is likely to stay that way regardless of what the Fed decides in December. If you have any other questions about interest rates or about the real estate market in general, give me a call or send me an email. I would be happy to help you!