Are you looking for a new house? In case you want to borrow a mortgage in order to pay for the home, you may be wondering regarding your interest rate as well as its fluctuations over time. This article will look at the way in which the Federal Reserve's rate changes can affect your mortgage interest rate.
Understanding The Federal Funds Rate
It is a known fact that the Federal Reserve is the banking arm of the government and is the financial institution that works to oversee nationwide economic health. Although the "Fed" doesn't determine mortgage or other interest rates, it essentially steers the monetary policies, influencing these rates. Through the execution of these policies, the Fed steers a few rates higher or lower.
One specific rate, called the Federal Funds Rate, is crucial when it comes to its impact on mortgage interest rates. The Federal Funds Rate is the interest rate that is used by banks to lend money to each other. In case you learn that the Fed is moving a rate up or down, it probably relates to this. Upon the changing of this rate, it results in trickle-down effects, impacting mortgage rates.
There Are Positives In Both Up And Down Moves
Interestingly, home buyers can enjoy several advantages based on whether the Federal Reserve moves up or down. In case the Fed decides to increase them a little higher, the same trend is probably observed in the mortgage interest rates. But in several markets, this could also decrease the home prices. Alternatively, the lowering of the rate guidance by the Fed will also decrease the mortgage rates. Thus, in case you take a mortgage out when the rate decreases, you will pay less in interest over the mortgage amortization period.
Thus, there may be advantages regardless of what direction the Fed moves in.
Let Your Mortgage Professional Guide You
Continuously learning about the movements of the Federal Reserve can be tiring, particularly when you just want to purchase a new home. Thus, let your mortgage broker or advisor deal with this process.
Regardless of whether you want to purchase a new home or refinance your current mortgage, we are here to help. Get in touch with our professional mortgage advisor team to learn about the current interest rate trends. Call me at 1-877-824-2747 or email me at info@charissarealty.ca for more information.
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