Interest Rate Rises and Real Estate - Some Perspective

It probably won't have escaped your attention that the Federal Reserve raised short-term interest rates last week.

The federal funds rate was raised by a quarter percentage point to 2% - the seventh rate increase since December 2015. The Federal Reserve also indicated that there are likely to be another two rate hikes this year.

The first thing to say is that the federal funds rate is not directly related to mortgage rates, however it does of course pertain to other forms of borrowing, including credit cards and auto loans.

I think it's important to examine why these increases are happening. They are a direct result of the very, very strong economy and incredible confidence that's everywhere right now.

So, while no one welcomes higher borrowing costs, there is an offset in terms of the recent tax cuts and let's never forget that higher interest rates are great news for savers, including those saving for a home (saving account rates are now at a five year high).

Here in Iron County, we're seeing no reduction in the fabulous levels of enthusiasm of home buyers and there are no signs that the wonderful market conditions we've been enjoying for some time are going to diminish.

Mortgage rates are also higher these days and aren't adversely affecting housing demand here either.

Higher interest rates are, in fact, a direct result of a much better economic environment, which can only help to further improve things.

Why not contact us to discuss the fantastic opportunities in today's market.