Dear Friends and Friends of Friends - 

 

The U.S. Federal Reserve Bank raised its key interest rate by 0.25% today, for only the second time in a decade, reflecting the improving economy. It's a good thing.

 

According to Reuters, the Fed indicates it may raise the rate another 3 times in 2017 and again in 2018 and beyond, until it reaches 3%, from it's current 0.5%.

 

As CNN points out, this means savings account interest rates will likely rise, but so will mortgage and credit card rates. Since the election on Nov. 8, average 30 year mortgage rates have increased from 3.5% to 4%.

 

At 4%, homebuyers pay $478 per month for every $100,000 borrowed on a 30 year mortgage. At 4.25% they pay $492 per every $100,000, or $25,200 more over the course of the loan on a $500,000 mortgage, or $50,400 for a $1million mortgage. At 4.5%, homebuyers pay $507 each month per $100,000 borrowed, or $145 more per month than a 4% mortgage of $500,000 and $290 more per month on a $1million mortgage.

 

To put this in context, before the 2008 recession, normal mortgage rates of 5%-7% were considered "historically low" compared to previous year norms of around 8%, so increasing current interest rates to 4.5%, or 5%, or even 6% should do little to dampen current demand and housing prices. But it does seem those in a position to buy now can save significantly by doing so.

 

Please let me know if I can provide any information or assistance, general or specific, about your or your friends' real estate needs. Contact me at 917-538-4516 or JMolishever@Citi-Habitats.com

 

Best regards,

 

Jay