The US Federal Reserve chairwoman, Janet Yellen, just announced the the Federal Reserve increased interest rates from 0.50% to 0.75% on December 14th, 2016. This is the first increase in 2016 and the second increase in 2016. The 0.25% increase was a unanimous decision by the Federal Open Market Committee.

Chair Yellen’s reasoning for this increase is due to the US economy’s recent positive performance.

 

“Over the past year, 2.25 million net new jobs have been created, unemployment has fallen further, and inflation has moved closer to our longer-run goal of 2 percent. We expect the economy will continue to perform well, with the job market strengthening further and inflation rising to 2 percent over the next couple of years.”

Federal Reserve Chairwoman Janet Yellen
Chair Yellen’s Press Conference
December 14, 2016

This increase will have several effects on the economy and for homeowners. If you have a home equity line of credit, you should expect short-term rates to increase. If you have a regular mortgage, the mortgage market has already priced the rates in and adjusted. Increased interest rates will eventually affect the cost of housing, cars, student loans, and even credit cards. Real estate investors must pay more to purchase and maintain their rental properties. This means those costs are passed on to their renters.

 

federal reserve

 

The Fed has already hinted that it could raise 2017 interest rates even quicker. We recommend consulting with your mortgage Broker to make sure you have a plan for 2017.

 

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