The first Federal Reserve interest increase in ten years has happened! The last increase was in June 2006 when unemployment was at 4.4% and the housing bubble was about to burst. While this is a great sign for the economy there are some upsides and downsides to this increase much like any other change. With change, there is always opportunity, the market still favors home sellers but buyers can also take advantage of the market and lock in a low interest rate before they start to rise. As interest rates rise, buyers will be purchasing less home for the same purchasing payment.
Here are some of the potential benefits and downsides to the Fed Rate increase:
- Loss of purchasing power – When interest rates go up, monthly payments go up. If interest rates move 1%, buyers will lose 10% buying power. 2-5% drop in purchase power (credit card payments will rise)
- Home Buyers – The typical 30 year mortgage rate will raise from the historic lows we are used to seeing the past few years. This doesn’t mean the end of the world, but this great time to borrow money is changing.
- Stock market – Higher rates are usually bad for stocks, but not always!
- Trading overseas – With the rise in power of the American dollar this will create higher price points for out of country consumers purchasing American goods, thus slowly export trade
- Savings – Interest rates on savings accounts will start climbing
- Travel – With the increased power of the American dollar, a George Washington will go further over seas than it currently does
- The Fed wants to raise rates slowly – This will help us all adjust to these new changes
- This increase is a sign of long term strength in the United States economy
We all knew the day would come when The Fed raised interest rates and with change comes opportunity. Right now we are still in an incredibly hot sellers market but the shift in purchasing power is here. If you are wanting to sell your Snohomish County or Seattle area home contact us today to find our what your home is your worth. If you are looking to buy we recommend buying now and locking in your interest rate!