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How Will New Fed Interest Rate Hike Hit You?

by blogger1
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on Wednesday, 16 December 2015
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The Fed has officially begun hiking interest rates. How will it impact you, and the real estate market?

New Fed Rate Hike

The US began raising rates in mid-December 2015, for the first time in almost a decade. Despite the fact that Wall St. has been contracting at just the thought of a hike, and oil prices have only softened, the fed has launched a new campaign to lift rates. The debate has been a catch 22 situation for those in power that have been caught between the fact that we aren’t experiencing real growth, and the fact that low rates haven’t changed that either. A failure to raise rates would kill confidence, but many have feared a hike will only kill off the growth we’ve had. Debates aside we’ll likely see an extended period of rising rates. What does that mean for real estate?

Fear of Rising Mortgage Rates

Major US banks wasted no time in instantly raising prime rate in reaction to the fed move. Many HELOCs are directly tied to prime rate. That means an instant hike to interest and payments for many US homeowners. However, Bankrate.com reports only a modest nudge up in conventional mortgage rates so far; back up to 4%. This upward pressure could grow over the next quarter, and beyond. However, there is often a seasonal dip in mortgage rates in the few days after Christmas for those under contract and desiring to lock in low long term fixed mortgages.

The biggest losers are those with adjustable rate mortgage loans. Fortunately few regular homeowners or long term hold investors have probably fallen for taking out an ARM in the face of a furious rate hike spree. Those that may have may face the need to immediately refinance or sell their properties.

Highly Motivated Sellers

The rate hike certainly puts pressure on sellers. Properties have been priced high based on cash flow and low rates. The numbers are set to dramatically change on many properties. Now is the time for owners to sell fast before the numbers get worse.

Ultimately this is great for wholesalers who may find access to more highly motivated sellers, and motivated buyers, it just might not be as fun for everyone else going forward. Move fast, and make that money.

 

Authored by Best Transaction Funding BestTransactionFunding.com is the leading source of transactional funding and hard money loans for real estate wholesalers in the US, where 100% financing, and saying “Yes” is what we love doing all day long.

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