We saw some economic reports this week that reflect continued economic recovery. The big one was Gross Domestic Product, the broadest measure of goods and services produced in the U.S., was reported at 4.6% for the highest reading since 2011. Economists warn that job growth still needs to pick up, but this was welcomed news. It gives the Federal Reserve assurances that their steps to slow the bong buying and their look at raising short-term interest rates may be warranted sooner than later. The short-term rate they’d adjust will impact housing. Home Equity Lines of Credit typically use the Prime rate as their index for the interest rate on that type of loan. Right now Prime is at 3.25%, a historically low level. The Feds will raise this rate slowly and incrementally, but eventually it will begin to move these Home Equity Line of Credit rates higher. It will take continued signs of growth before they make the move and it just worth noting at this time that folks with Home Equity Lines should be aware it’s coming.
The good news for the overall economy does put pressure on mortgage rates. The higher confidence investors possess will pull money into riskier investments like stocks, but much of that money that is being invested into stocks comes out of the mortgage bond market to do so. That reduction for demand in bonds is what ultimately makes rates rise; the lower the demand, the higher bond sellers have to move their rates of interest to entice investment! It is quite the economic see-saw we’re always on. The important part of this is that interest rates are coming off their lowest points of the year. The slight rise we’ve seen still leaves rates at historical levels and continues to support great value and affordability in real estate investment.Jason F. Griesser, CMB
Sr. Mortgage Consultant
Ph: 215-440-2073 | Fx: 610-650-5611