When the Fed Increases the Interest Rate

Posted by Dennis DeSouza on Sunday, August 16th, 2015 at 7:45pm.

Graphic of door with keys in it that reads "When the Fed Raises the Interest Rate: DeSouza Select Properties""

To date, the Federal Reserve hasn’t publicly announced plans to increase the interest rate in September.

Nevertheless, there will come a day when the interest rate is increased. The Federal Reserve hasn’t raised the rate in 9 years, which has resulted in historic lows. Mortgage rates on 30-year fixed loans have been under 4 percent for the better part of this year. They won’t remain there indefinitely.

An increase in the federal funds rate will lead to higher dividends on savings and higher interest rates on new mortgages. The former is good news for many, while the latter isn’t quite as well received. 

The San Diego Union-Tribune quoted local economists who believe the interest rate increases will be gradual and that low supply and high demand is pushing prices upward in San Diego County.

C-2 Financial loan officer and San Diego State University real-estate lecturer Mark Goldman told The San Diego Union-Tribune that he believes the rate hike will slow sale price appreciation, but that prices will still increase. Ultimately, the San Diego real estate market will continue to grow.

What this means for La Jolla sellers:

Monthly payments on new mortgages will be higher and could price individuals out of the marketplace. Some potential buyers may opt to stay in current properties to take advantage of locked in low interest rates instead of purchasing new homes. Sellers may have to consider assuming higher portions of closing costs, offering buyers options or even reducing asking prices.

What this means for La Jolla buyers:

Buyers will face increased mortgage rates even if they possess unblemished credit reports and sizable down payments. They may have to purchase points or consider alternatives to traditional 30-year fixed loans.

Bottom line:

Arguably, the ideal time to buy a home in La Jolla is before the interest rate is increased, whether that takes place next month or next year.

Understandably, that isn’t an option for everyone. There are several ways that La Jolla buyers can ensure that they get the best deal possible no matter when they buy:

  • Contact a realtor to learn about factors affecting the La Jolla real estate market
  • Stay informed of all available financing options
  • Save money to make a down payment

For information about buying or selling homes in La Jolla contact DeSouza Select Properties.

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