How Rising Interest Rates Affect Homebuyers

Slowly but surely, America is climbing out of the worst economic downturn we've seen since the Great Depression. Almost ten years after the housing crash in 2008, we're seeing signs of a brighter future on the economic horizon. One of the most promising signs is that the Federal Reserve finally delivered the promised interest rate hike at the end of 2016. This is definitely good news for our economy overall, but it can have a significant impact on prospective homebuyers. Arrowhead Title, Inc. is here to help you understand how these rising interest rates may impact homebuyers at the Lake.

The Federal Reserve's Key Interest Rate

The Federal Reserve has only raised the key interest rate twice since 2006. The first hike occurred in December of 2015. They projected rates to rise four more times throughout 2016, but the next increase did not occur until just last month (December of 2016). 

During the housing crash of 2008, the Federal Reserve slashed the key interest rate from 5.25% all the way down to 0%. This drastic decrease, coupled with the overall economic downturn, has been largely responsible for the remarkably low interest rates we have seen all across the country. The historically low rates have impacted nearly every aspect of our economy, from the affordability of mortgage loans to the relatively low payouts offered by investments and savings accounts.

At the end of 2015, the Federal Reserve raised in the national interest rate to 0.25%. A year later, it continued the trend by raising the interest rate another quarter of a percent. This means that as of last month, the key interest rate now stands at 0.5%. Since the country has seen positive economic growth throughout 2016, experts predict that the interest rate will rise two to three more times in 2017.

How The Key Interest Rate Affects You

The Federal Reserve is not responsible for setting the exact interest rates in all the various industries. It is up to the individual banks, insurance companies, mortgage companies, and other businesses to determine the interest rates they wish to provide to their customers. However, the trends set by the key interest rate strongly influences their decisions. For individuals planning to save money, the trend is definitely a positive one. After years of providing little to no profit, people with savings accounts and investments should start to see an increase in profit. For individuals planning to borrow money, however, the rising interest rate could mean they will end up paying a great deal more for their loans.

Now Is The Time To Buy A Home

Rising interest rates may only have a small impact on smaller loans, but it can have a huge impact on borrowers purchasing big-ticket items such as expensive vehicles, boats, and homes. If you have been thinking about buying a house at the Lake of the Ozarks, it may be enormously advantageous to move forward sooner than later. A quarter of a percent may not seem like a big increase, but when you are taking out a loan for several hundred thousand dollars, it can add up quickly.

While the serious impacts of the rising interest rates may not be felt immediately, experts are encouraging prospective homebuyers to move forward. While still at overall historic lows, mortgage rates are already rising in response to the Federal Reserve's announcement. Unlike many homebuyers in 2015 and 2016, those buying a home in 2017 may not be able to secure mortgage loans with rates less than 4%. Since the Federal Reserve is expected to raise the key interest rate a few more times in 2017, it may be smart to move quickly if you are considering buying a house in the near future.

Remember Arrowhead Title, Inc. For Your Local Title Needs!

If you are preparing to purchase real estate in the Lake Area, we hope you'll consider Arrowhead Title, Inc. for your Lake of the Ozarks title company. Our team of experienced professionals is dedicated to your success - we promise to handle your transaction with the same precision and attention to detail that we would our own. For more information about our title services at the Lake of the Ozarks, visit our website at or give us a call at (573) 302-1950. We'll be happy to answer any questions you may have!

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750 Bagnell Dam Blvd Suite B
Lake Ozark, MO 65049


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