What the Fed Funds Rate Increase Means for Homebuyers

The Federal Reserve announced a change to the rate from 1.50% to 1.75%, in March 2018. The rate is also projected to increase incrementally in 2018. Adjustments to the fed funds rate are something you should be paying attention to if you’re planning a home purchase

What does this mean for you? Interest rates for debt vehicles like credit card products, auto loans, and mortgages are all impacted by the fed funds rate.

Whenever the fed funds rate increases, you can expect to see interest rates trend upwards as well. Even small interest rate increases can have a major effect on how much it costs you to borrow money.


Average Mortgage Rates See an Increase

According to data from FreddieMac, the average interest rate for a 30-year fixed-rate mortgage moved from 3.95% to 4.58% between January and April 2018.

The average mortgage rate is just a benchmark to show you an overall trend. A lender will look at your credit and other factors to determine your offer which may be more or less than the average reported by FreddieMac. However, the increasing average could be a sign that you’ll start seeing higher offers today than you would have seen last year.

The Fed Signals Gradual Rate Increases — What should you do?

You shouldn’t make buying decisions solely based on interest rates. Saving up for a downpayment, cleaning up your credit, and becoming financially stable enough to manage homeownership are actions that should precede a home search.

However, homebuyers ready to purchase may want to consider making some important decisions soon to take advantage of rates before they soar.

Pick a Lender

Consider committing to a lender so you can lock in an interest rate. Locking in a rate can help you snatch a deal before prices hike. Be vigilant of rate expiration dates if you do decide to lock in because you could end up losing a competitive rate if you don’t close on a home in time.

Lock-In Your Rate

If you’re ready to lock in a rate, contact us or complete a prequalification application to learn more about the products that Atlantic Coast Mortgage has available. Our rates are some of the most competitive rates in the market.

Review Your Current Mortgage

Current homeowners may be able to take advantage of competitive interest rates now before they increase as well. If you have an adjustable-rate mortgage (ARM), you could consider refinancing to a fixed-rate mortgage.

An adjustable-rate mortgage is one that fluctuates. The fed funds rate increase could mean that you’ll begin to see a rise in your mortgage payment. Refinancing to a fixed-rate mortgage may help stabilize your payments and could be a smart decision depending on your circumstances.


Final Word

If you intend to borrow money for a home or any other reason, being aware of interest rate trends can help you make a savvy buying decision that you’ll thank yourself for in the long run.

What seems like just a few percentage points saved on an interest rate now can end up being quite a bit of money saved over the life of your loan.


Atlantic Coast Mortgage, LLC is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA, the Federal or State Government.

In accordance with the Equal Credit Opportunity Act, Atlantic Coast Mortgage, LLC does not discriminate against any applicant on the basis of race; color; religion; creed; national origin; ancestry; sex; marital status; familial status (number and age of children); sexual orientation; age (provided that the applicant has the capacity to enter into a binding agreement); medical history; disability; physical condition; military status; because the applicant has in good faith exercised any right under the Consumer Credit Protection Act or the Service members Civil Relief Act (SCRA); that all or part of a consumer's income derives from a public assistance program; or any other basis prohibited by law.

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