Feds Raising Rates
Looking back many of us probably wish that we paid better attention during Economics class in high school - I know I do! As an adult I am having to constantly learn life skills, including information about inflation, the Federal Reserve raising rates, and what that means for individuals.
I know many of us have been hearing about the Feds raising interest rates this year. But what does it mean? And what does that mean for you?
What is inflation?
I won't dive too far into it, but to put it simply, it is the increased cost of goods and the decrease in the worth of a dollar. Inflation is when the power of a dollar decreases and with a lower purchasing power it causes the cost of goods to increase. Inflation rates in the United States has reached an all time high of 7% back in December 2021, which is the highest in the last four decades.
What does it mean when Feds Raise Rates?
Basically this means it will cost more to borrow money which discourages some from spending and to basically slow the economy.
How could this affect you?
There are numerous situations that can happen, and I want to stress the importance of speaking with a financial advisor for your specific situation. This is just a generalization of things that can happen.
- It can be harder to qualify for a home loan as a buyer.
- There can be a higher monthly cost to your mortgage which can mean you will need to buy a home at a lower price point.
- There can be changes to your finances as a whole due to credit card interest increases.
- It will even cost more to buy a car due to the increase interest rate.
The federal reserve as of right now has left the amount of times it will increase this year open, but Bank of America Economic Forecasters are now saying the federal reserve could raise rates 7 times! Rates haven't increased like that in over a decade. It is hard to determine how many times the rates will increase. Currently, forecasters are all over the board from 3 times this year, all the way to 7. But no matter how many times it is increased it still plays a role in your ability to purchase a home, and plays a role in the price you pay for other goods on borrowed money.
If you have been considering purchasing a home, but are waiting for that right time. Know that the best time to buy real estate was always 10 years ago. If you are debating purchasing, we recommend speaking with a lender and a REALTOR® to find out more about the market and your best options.
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Curious about more inflation and rate information? Visit these websites