SHEEPSHEAD BAY, NY — Feb. 11 (FreeRateUpdate.com) – Yesterday on FreeRateUpdate.com we covered the Fed “text”, their broad outline for raising short term interest rates, stopping their purchases of Treasuries and MBS, and tightening credit. Ben Bernanke was unable to answer questions due to a massive snowstorm, meanwhile I was outside fixing a ruptured pipe under our foundation slab in some snowy rain stuff, fightin’ the wind at the same time, but that’s another story. Warm and cozy Bernanke left us with a text with just broad details leaving open endless possibilities but most importantly the markets weren’t spooked. Prices mortgage backed securities, which push mortgage rates in the opposite direction, were up, up enough that we face the possibility of 30 year fixed mortgage rates rising today. Still though 30 year fixed mortgage rates are well under 5%, historically low, and surely not turning off potential buyers.
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Something the average person can take from the Fed’s announcement they’re planning an exit strategy that includes raising short term interest rates, fix your adjustable rates. You home equity lines of credit, adjustable rate mortgages, anything tied to an adjustable index is going to be rising fast once the Fed starts raising rates. That $100 payment on your HELOC is going to shoot up to $400. If you’ve got an ARM set to adjust, instead of adjusting to a 3.5% rate, try 7, 8% on for size. Payment shock will hit some, some will take the necessary steps, if they’re able, to consolidate into a low fixed rate now.
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