Interest Rate Increase in 2022
As the unemployment rate continues to drop and the housing marking moves towards stabilization in many areas, there’s a push for the Federal Reserve to increase the interest rate. There is a hope that the interest rate increases will help put a lid on the current rate of inflation.
Presently, we’re in a hot labor market which means employers are paying more to retain employees and most people who are looking for jobs are able to find them. With jobs at elevated levels, and people leaving jobs that they don’t like, this puts the power in the hands of employees which is why employers are starting to pay more and focus more on job environment and income to retain employees that they do have.
Average hourly earnings climbed over 4.7% in the year through December as per the New York Times, which was an unprecedented rate. As a result, the Federal Reserve is expected to increase interest rates in early 2022.
What Does an Interest Rate Hike Mean?
In short, when the Federal Reserve interest rate hike happens, that means savers can make more on their savings, but borrowers will pay more to borrow money. Interest rates have been so low for so long that many younger borrowers – especially the Millennial Generation – have not known a time when borrowing was very affordable and savings did not pay back much at all. And while the Federal Reserve can only change one rate, the federal funds rate, that rate determines how much interest financial institutions can charge one another to borrow money overnight. Most of the other interest rates in the economy are tied to this core rate, which drives up the rate for borrowers including mortgages and other major purchases through lenders.
The good news is that the higher interest rate means better news for savers, and bad news for borrowers. If you have money in savings, great! But if you are looking to make any major financed purchase such as a car or a home, now is the time to do it before the rates go up!
A Good Time To Buy?
Now is a good time to buy or refinance a home before the rates go up. Rates are still low, and while there are rumblings of a rate change coming, in line with many economists predicting that a change from the Federal Reserve will be here by spring, there is still time. That means if you’re looking to buy a home, or refinance your current home, time is of the essence.
While the real estate market is still hot, it is expected to take some time before mortgage rates also go higher so there’s no need to panic. However, with a strong market across the Hudson Valley, it’s a good time to look for the house of your dreams to call Ulster County home – and get the financing you need in order.
Ready to make the move to Ulster County? Ulster County Board of REALTORS® is here to help. Contact us and we can help you find the home or property or even real estate investment that’s right for you – before the rate changes go into effect!