It had been nearly a decade since the Federal Reserve increased the target rate and seven of those years had been spent near zero percent. This historical length of accommodative monetary policy all came to an end on Wednesday, December 16th, when the Fed announced a quarter of a point increase to their target rate, increasing it to .50%.
Mortgage interest rates don’t directly follow the fed funds rate and are not expected to shoot up in the short term, but experts are calling for a 1% – 1.5% increase over the next 12 months. The average homebuyer isn’t quite aware of how low mortgage loan interest rates really are right now. According to CNBC, sixty-seven percent of prospective homebuyers surveyed by Berkshire Hathaway HomeServices, a network of real estate brokerages, categorized the level of today’s mortgage rates as “average” or “high.” The current rate of 4 percent on the 30-year fixed is less than 1 percentage point higher than its record low; this is drastically lower than the 18% the market saw in the 1980’s.
So is now the time to get a mortgage loan? Doug Duncan, senior vice president and chief economist at Fannie Mae may have put it best: “The rule for when is it time to buy is always the same: given your household budget and where current interest rates are, if it makes good financial sense to take out a home loan today, then today is the day to do it.”
