Over the past few years, the Federal Reserve (the Fed) has been gradually raising rates to fend off inflation and return to a more normal rate environment.
According to Freddie Mac, as we approach the end of 2018 the average rate for a 30-year fixed-rate mortgage is hovering around 4.75% — up from 3.95% at the beginning of the year. According to the Wells Fargo 2019 Outlook, as interest rates rise, real estate supply and demand conditions often deteriorate. This may negatively impact property values.
While there’s no guarantee of what the Fed will do, signs point to rising rates for 2019. So what does this mean for you, as a homeowner? Here’s what you need to know.
Your mortgage type might influence how rising interest rates hit your budget
Homeowners with fixed-rate mortgages who have no plans to sell, move, or buy another home in the near future likely won’t be very affected by rising interest rates.
Homeowners with adjustable-rate mortgages (ARMs) might want to keep an eye on rising interest rates if they are close to an adjustment period, because those increases may impact their monthly payments. As interest rates rise, payments on ARMs may also increase. However, refinancing your ARM to a fixed-rate mortgage can provide stability — and you gain protection from rising interest rates.
Homeowners with a Home Equity Line of Credit (HELOC) may also be interested in the rise and fall of rates. If you’re concerned about rising rates and have a HELOC with Wells Fargo, you may have the option to take a fixed-rate advance, which provides the ability to convert some or all of your HELOC’s balance to a fixed-rate repayment.