What the Fed Rate Hike Means for Homebuyers

It can be a tough market for home buyers. Prices are high and supply is low.

While this Wednesday’s Federal Reserve rate hike of one-quarter of a percentage point could make home buying more expensive, house hunters shouldn’t start to panic.

Mortgage rates tend to move with the government’s 10-year Treasury note, which serves as a benchmark for many forms of credit, including mortgages. Because Wednesday’s hike was widely expected, the markets had already priced it in. Many experts don’t see rates moving much higher in the coming weeks. The Fed has now raised rates three times since the end of 2015. At the current interest rate, buyers will pay $57 more per month compared to a year ago, assuming a $235,000 price point and a 20% down payment. That might not be a deal breaker for many, but it could hurt those shopping in more expensive neighborhoods, or those right on the margin of being able to afford a home.

Bottom line: Rates are still relatively low, and many experts don’t expect them to rise above 5% this year.

 

 

 

 

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