Why Interest Rates are Rising and What is Means for You

Interest rates started to inch up last month after nearly seven months of sub-3%. Even with the recent increase, rates are still historically low, averaging at under 3.25%. Now is still the ideal time for both buyers and sellers to act. 

The primary factor that causes interest rates to rise is the anticipation of inflation and a robust economy. Over the past year, interest rates were lowered as the Fed worked to stimulate the economy in response to the partial shutdown and no fear of inflation because of the Covid-19 pandemic. 

Now, there have been two significant changes. With the Covid-19 vaccine anticipated to reach nearly everyone who wants to be inoculated within the next six months, the economy is re-opening. Secondly, Congress passed the 1.9 Trillion Dollar Stimulus Bill. The bond market that affects interest rates moves up and down daily like the stock market sees both factors as inflationary. Since interest rates rise based on the “anticipation” of inflation, not actual inflation, coupled with a robust economy, rates are now starting to inch up.

There is more demand for housing today than there is supply, and interest rates are still historically low. The slight increase in interest rates is currently having little effect on payments. It is important to contact your lender to confirm your new expected payment and if there is any difference in the loan amount your qualify for.

If you are selling your home, it's important to recognize that as interest rates increase, home price increases will inevitably begin to slow, so listing now, while the demand is high, will give you the best option to secure the highest price possible for your home. 

As always, we are here to guide you every step of the way!