At a much anticipated meeting, The Fed raised interest rates today for the first time since 2006. The Federal Reserve raised their key interest rates from a range of 0% to 0.25% to a range of 0.25% to 0.5%. This hike indicates that the economy has healed a lot since the recession because the economy is strong enough to survive without super low rates. In 2006, they had put the rate close to zero in order to help stimulate the economy and especially the housing market. Now, the economy is healthy.
“I feel confident about the fundamentals driving the U.S. economy, the health of U.S. households, and domestic spending,” Fed chief Janet Yellen said during a press conference. “There are pressures on some sectors of the economy, particularly manufacturing, and the energy sector…but the underlying health of the U.S. economy I consider to be quite sound.”
12 million jobs have been added in the US since the recession ended. Wages have started to increase, too. The Fed expects unemployment to lower to 4.7% in 2016. From here on out, the hikes will remain low and gradual so that they do not have a negative impact on the economy. The committee said it would take “readings on financial and international developments” into account when making future decisions about raising the rate.
Raised interest rates by the Fed means that all types of borrowing will become more expensive, including mortgages. However, the hike was still small and so if you are considering buying a home, the consequences are not huge. Doug Duncan, chief economist from Fannie Mae, said that the hike of only a quarter of a percentage point has virtually no effect on mortgage rates. The monthly cost of an average $225,000 mortgage will increase by only $26.
So, if you are thinking of buying a home, do not be scared off by raised interest rates today. Check out all of the properties available in Miami today and contact a RE/MAX Paradise agent to tour one soon!