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Hike in Interest Rates: Low Interest Rates are going, going, GONE! - Sedgewick
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Hike in Interest Rates: Low Interest Rates are going, going, GONE!

Hike in Interest Rates: Low Interest Rates are going, going, GONE!
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As your Home Building Industry experts in North Carolina, we want to let everyone know about the hike in interests rates expected to occur in 2017. In fact, they’re already on the rise. In December 2016, the Federal Open Market Committee the “policy-making arm” of the Fed, raised the most basic interest rate a quarter point, or 0.25 percent. After this occurred, many banks increased their prime rate from 3.5 percent to 3.75 percent.

There’s More Interest Rate Hikes Planned for 2017

In a news conference following the December rate hike, the Federal Reserve announced they have high confidence in the economic outlook for 2017. This confidence is good news for our country, but along with that confidence comes higher interest rates. At this point, the Fed anticipates raising the interest rate three times in 2017. Originally, they only planned to raise the interest rate twice. However, some financial and economy experts believe it will actually end up being only two more interest hikes this year if the economy doesn’t grow as fast as they expect. At any rate, it is almost a one hundred percent guarantee that interest rates will be raised two to three more times this year.

Why are they Raising Rates?

There are a lot factors the Federal Reserve has considered regarding the anticipated 2017 interest rate hikes. First, the unemployment rate fell from 4.9 percent to 4.6 percent. Some Federal Reserve board members also responded to what they expect to happen under President-elect Donald Trump’s administration; especially with respect to his promise to lower taxes and to spend more federal money on improving infrastructure. Some board members also factored in the recent surge in the stock market after Donald Trump was elected. The high probability of there being some changes in the federal budget were also part of the discussion.

How Does This Affect You?

Janet Yellen, who chairs the Board of Governors of the Federal Reserve, called the change in the initial plan to raise interest rates only two more times, instead of the three rate hikes now expected, a “modest adjustment.” However, for most middle class Americans dreaming of building a new home, these three interest rate hikes could significantly increase the cost of doing so over the long-haul.

This is especially true if you add up the price difference over the course of twenty to thirty years, the lifetime of most home mortgages. The difference can also significantly impact a long-term loan for a major home improvement project or a home addition.

What Type Of Home Loans Will Be Affected the Most?

While the interest rate hikes will impact all types of home loans to some degree, it is expected that adjustable rate mortgages and home equity loans will be most impacted. The best way to avoid these anticipated interest rate hikes is to secure your home loan BEFORE they take effect. If you’ve been thinking about building a new home and waiting for the best time, it would be in your best interest to move forward as quickly as possible. As the rates go up, they’ll be gone forever. If you need help determining how much a new home or project will cost, please don’t hesitate to call us.

Building In the Early Spring?

As you enjoy the rest of the North Carolina winter, you may want to put your plans to build a new home into action; before the next interest hike occurs. Taking advantage of today’s interest rate is one opportunity you don’t want to miss.

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