The Fed just raised interest rates and what this will mean for you and your Outer banks Beach house, home mortgages, cash investments, debt and moving forward.
The fed raised both the federal funds rate, which is an overnight rate at which banks borrow money from each other. The fed also raised the discount rate and that is the rate at which banks borrow money on a short term from the Federal Reserve.
What does this mean for home loans such as Fixed rate mortgages, Home Equity Lines of credit (HELOCs) and variable rate credit cards? Prime rate is tied to these short term rates and many loans are tied to indices like LIBOR or Prime Rate. This was raised by 25 basis point or .25 %.
The good news is that your cash in the bank such as CDs or money market will see an increase. So your cash can make a little more for you.
Here are a few steps to take that can help you cope with these changes. Rates are still very low so take advantage.
- With Credit cards, consider transferring your balances to a low variable rate card and get the special low or no interest rate offers for a period of time.
- If you have a HELOC with a high balance, verify if your lender offers a fixed rate option, this can provide protection to you if rates continue to rise. Sometimes there are small fees associated with these changes, so evaluate your personal situation to see if it make sense.
- Do not lock in your money to long term savings products 3-,4- or 5- year CD’s. Instead wait to see what the Fed does with the rates.
- There are currently ARM (Adjustable Rate Mortgages) that offer extremely low rates for terms of 3-,5-,7- and 10- years. The average homeowner according to NAR moves every 9 years to a new home. This product may work for you, just check it out.
The homes for sale on the outer banks are subject to these changes and many of the homes are investment properties, second homes and vacation homes. Typically, the history has shown in my 17 years here and inverse affect on pricing/interest rates. In other words as interest rates increased, property pricing was either stagnant or decreased. Now may be the time to sell that beach house, call us we can help or for your FREE MARKET ANALYSIS.
We at “The Hawkins Team” hopes everyone has a Merry Christmas and a Happy and Prosperous New Year in 2016!