Fed Decision Affects Short-Term Options
In a split decision, the Federal Reserve dropped the benchmark lending rate another quarter point last week. This brings the Fed rate down to 3.5% to 3.75%, in the effort to balance the current economic issues of rising unemployment and stubborn inflation. While this does not directly affect long-term mortgage rates, some shorter-term mortgage options may be worth looking into now.
Lower Introductory Rates on ARMs
We can expect to see lower introductory rates on Adjustable-Rate mortgages (ARMs) as a result of the recent Fed decision. Introductory rates on ARMs are typically set for 5, 7, or 10 years.
Homebuyers often consider this type of loan to reduce monthly payments in the initial phase of the loan. This works well for borrowers who do not intend to stay in the home for an extended amount of time, or anticipate a future increase in income. Another option is to refinance before the loan resets, if rates are trending up.
We help borrowers weigh out the pros and cons of this type of loan, and provide specific analytics based on income, credit scores, and other factors.
Pay Off Debt at a Lower Rate
Homeowners with built-up equity may want to consider paying off high-interest credit card debt at a much lower rate with a Home Equity Line of Credit (HELOC) now. For example, in early December, the average HELOC rate was at 7.81%, while the average credit card rate hovered around 19.8% to 20%.
A HELOC provides flexible access to funds for any purpose. Whether you want to consolidate debt, pay for home improvements, or start a new business, we’re here to help you make educated decisions about managing your mortgage.
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