The Federal Reserve are expected to raise interest rates in June, according to reports. Rate hikes usually becomes a deterrent for people racking up credit card and other revolving debt. It should encourage savings. But it may also create a lot of FOMO (fear of missing out) among would-be home buyers thinking if they don’t get in now, interest rates may be prohibitive.
Let’s put interest rates and mortgage interest rates, in particular, in perspective.
In the late 1970s, if you were purchasing a new home the average buyer would be looking at a 16.5% interest rate on a conventional mortgage loan. Peaking in the early 80s at 17%, mortgage rates have fallen significantly every decade since. By the early 90s, mortgages were officially out of the double-digit range, hovering around 6%-8% until 2007. The market finally bottomed in 2015, with rates as low as 3%.
While the 1980s brought extreme highs and the 2000s extreme lows, the truth is even if you weren’t able to make a purchase in the next couple of years you would still come out a winner if you look at interest rates from a historical perspective.
Whether you are looking to buy or to refinance don’t allow yourself to be stymied by the talk of rising rates. Your energy is best spent cleaning up your debt and putting yourself in position to be sought after by multiple lenders.
If you are looking to refinance, make sure your credit is in great shape. Work to put yourself in a position to make the best decision from a position of strength. A high credit score, low debt, and a healthy savings will put you in a position to win, no matter what the interest rates are.