What You Need to Know About Rising Interest Rates: Information from a Real Estate Attorney in Miami, FL
Interest rates continue to rise, which potential homebuyers will need to keep an eye on as they search for the perfect property for their needs and desires. By working with a real estate lawyer in Miami, FL, you’ll be able to stay on top of all the latest information regarding interest rates and home prices.
As you would expect, increased short-term interest rates will also result in increased mortgage rates. But what types of implications does this have for real estate investors?
Perhaps the most important factor to keep an eye on is the Federal Open Market Committee, an organization within the Federal Reserve that consists of five Federal Reserve Bank presidents and seven governors of the Federal Reserve Board. This committee has eight scheduled meetings per year, and the outcomes of these meetings are important, having a significant influence on every single stock exchange, bank and financial professional in the nation.
At these meetings, the committee makes decisions regarding how it will regulate American monetary policies, which has an effect on all American financial institutions. The committee gives unified short-term interest rates to the banks. These rates are those that the financial institutions are allowed to give each other for very short-term loans, meaning it’s the rate at which the Federal Reserve sells money to the banks, and the banks then resell that money to their customers for lending in the form of mortgages and other loans.
Basically, this single rate will define all other interest rates in the American financial world. Clearly, this is extremely important information to track.
When do the rates change?
The short-term rates are raised (or in some cases lowered) when the FOMC determines the current national economic conditions either allow or require such a raise (or lowering). According to a report from the OECD, short-term interest rates in America hit their historic peak in the early 1980s, at about 18 percent per annum. Right now we are still within range of some historic lows, meaning those interest rates will only continue to go up over time.
The all-time low for short-term rates was 0.11 percent in May 2014, and mortgage rates hit their historic low of 3.41 percent for 30-year fixed-rate mortgages in early July of 2016.
Since those historic lows, short-term and mortgage interest rates have steadily grown. Currently, short-term interest rates are sitting at about 2.17 percent per annum, and mortgage interest rates (or the average for a 30-year fixed-rate loan) are at about 4.59 percent as of August 2018.
While the rates do continue to grow, investors should maintain some perspective, as rates are still in the range of historic lows. This is still an idea time to invest if you’re able to find the right property, because it’s likely that interest rates will only get higher and higher for quite some time.
For more information about rising interest rates, contact the office of Ruben J. Padron, PA today to speak with an experienced real estate lawyer in Miami, FL.
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