VA Loans Blog

Don't Expect Rapid Rate Increases

March 12th, 2015 6:03 AM by Joan Rusco

Mortgage rates may be increasing but don’t be discouraged if you’re still hopeful of a home purchase or perhaps refinancing your existing home loan.  In our last blog Mortgage Rates Set to Increase we suggested that rates are likely to go up, that the Federal Reserve at it’s March meeting is likely to set the stage for that increase and that such an increase is followed by a domino effect on all consumer rates.  So what?

 

Usually the Fed will increase it’s Federal Funds Rate because of an economy heating up. This comes as prices on goods and services (including labor) start rising too fast. An economy needs to be slowed down or else everything will be too expensive. That is not what’s happening now.

 

The Federal Reserve has set it’s target rate of inflation at 2%. That means prices of goods and services increasing year over year by 2%. Right now that number is just 1.3%, well below the 2% target. No economist will tell you the economy is too hot and needs to be cooled by raising interest rates rapidly.  So if the Fed does indeed decide on a course of interest rate raises we at VALoansMN do not expect repeated rate increases for the remainder of the year. What about mortgage rates?

 

We’ve just gone through a period of several months where rates were unbelievably low. They still are and we don’t expect much change no matter what the Fed does. Will rates go up?  Of course, but we do not expect dramatic increases from where we are today.  This economy is not overheating. Home builders are not flush with buyers so there’s no need to put the brakes on the real estate market. We see no need for lenders to start drastic rate increases. 

 

It’s hard for us in this post to tell you where rates are right now. This is something that changes every day, sometimes several times a day. We can only give you a quote on a mortgage loan rate by talking to you personally. There are so many factors involved in a VA loan rate. There is one thing of which we are certain beyond doubt: there is not a single loan program better for you than a VA loan. 

Posted by Joan Rusco on March 12th, 2015 6:03 AM

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