“Play it again, Ben?”
That’s right, according to Dave Walden, a certified mortgage planning specialist with Diversified Capital Funding of Pleasanton.
For the 16th time in a row in less than two years, Federal Reserve Chairman Ben Bernanke announced another rate hike.
“As expected, the Federal Reserve went ahead and hiked rates to the tune of another .25 percent to bring the Fed Funds Rate to its highest level in five years at 5.0 percent,” Walden wrote in his weekly mortgage market report.
“Why is the Fed hiking rates?” asked Walden.
“To keep the economy from growing too quickly, which can result in inflation and drive prices higher on the goods and services we purchase and use every day,” he answered. “And equally important to the rate hike itself was the Fed’s Policy Statement, which is always analyzed very carefully, as it often gives clues as to the likelihood of future rate hikes.”
The Fed statement indicated that although inflation appears to be controlled at the present time, further rate hikes may be needed, Walden said. However, the Feds stressed that the economic news over the coming weeks would be the determining factor in future rate hikes.
The Bond market didn’t like the air of uncertainty surrounding the policy statement, and home loan rates worsened by .125 percent over the course of last week.
“So what does all this mean to you, your friends, family, coworkers and clients? Walden asked.
Here’s the scoop from Walden: The Fed Funds Rate impacts many things, such as credit card rates and auto loan rates … and it directly affects the Prime Rate, which most Home Equity Lines of Credit are based on. It is also closely tied to the index of many Adjustable Rate home loans.
“A large number of Americans have either a Home Equity Line of Credit or an Adjustable Rate home loan, or may even have both,” Walden said. “With the Fed rate hike, those rates and indices just jumped again, which may be putting pressure on making monthly payments, or causing concern as to where that rate might be going in the future. So, there’s no time like the present to take a look at your own financing situation.
“It might be time to consider a different strategy that is a better fit for present market conditions,” he added.
