After seven years of some of the lowest interest rates in recorded history, the Federal Reserve has decided to raise the key Fed Funds Rate by 0.25 percent, which is causing some to be concerned that it will lead to a jump in mortgage rates and negatively impact the U.S. housing market. So, the question everyone wants to know is, do we need to worry about interest rates leaping? Although I expect there to be some volatility in rates for a while, I don't believe the real estate market will implode in a rapidly rising interest rate environment. So, yes, interest rates are going to rise modestly, but no, I don't think we need to be overly worried about it. To qualify this statement, we need to understand that mortgage rates do not run in "lock-step" with the Fed Funds Rate. Although the Fed Funds Rate is a bellwether for the greater economic environment, there have been times when these two rates have moved in opposite directions, as we saw in 2004 and 2005. Data curated b...
- The Federal Reserve has raised the Fed Funds Rate by 0.25 percent.
- Interest rates for revolving credit such as home equity loans are tied to the Fed Funds Rate, but mortgages are not.
- The Fed has said any upward movement in the Fed Funds Rate will be slow and steady but will reflect a greater economy.