For the first time in seven years the Federal Reserve raised the interest rate. After seven years of interest rates held low to stanch the bleeding from the worst financial crisis since the Great Depression, and after months of unusually public hand-wringing over the precise timing of liftoff, the Federal Reserve on approved a rate hike intended to start easing U.S. monetary policy back to normal. The policy-setting Federal Open Market Committee voted unanimously to raise rates by 0.25% to a range of 0.25%-0.50%, not a whole lot but enough to test the still-weakened U.S. economy’s ability to absorb the higher borrowing costs that will follow the increase.
With interest rates moving higher it will soon be more expensive for consumers to borrow money to buy big-ticket items such as homes, cars and appliances. Business will also pay more if they borrow to cover the costs for expansion and other capital investments.
Basically what it means is that if you’re looking to buy a new home, it would be in your best interest to make a deal sooner rather than later. Mortgage rates aren’t going to skyrocket but they will gradually start going up from here on. Analysts will be keeping an eye on the effect of this first rate increase to see what reaction the economy shows. If the economy is seen to have a positive reaction, that will open the way to further increases.
Although this may not be the best news for home buyers, there are also winners. A rate increase means that savings accounts will also yield better returns. Savers who have been seeing next to nothing being earned by their savings will begin to see some relief. This also translates to better returns on many other forms of investments.
Regardless of which side of the market you belong to, this will be an exciting time. There will be choices to be made that can either make or lose money in the coming years.