Federal Interest Rates to Stay Put
Filed Under Rates
If you are one of the many consumers who purchased a home with an adjustable rate mortgage because of the very low initial rates they were offering a few years ago, then you might have been in for a shock when the interest rate started adjusting based on the whichever index it adjusts on. The Fed has been steadily raising interest rates by 0.25% for several years, until the last period.
A report came out today stating that the minutes from the latest Fed meeting show inflation is still a major concern for them. Here is what Paul R. La Monica wrote for CNNMoney.com:Â
Economists think it’s looking more and more likely that the Federal Reserve will hold interest rates steady for quite a while, maybe through all of next year. So investors hoping for a rate cut in 2007 may need to kiss that wish goodbye.
“I think the Fed being on hold through 2007 is an entirely plausible scenario,” said Chris Probyn, chief economist with State Street Global Advisors.
It appears there will not be any rate cuts any time soon. The Fed rate will stay at 5.25%, perhaps through all of 2007. A worst case scenario would be the record breaking deficits will lead to further inflation. With more inflation the Fed chairman will be forced to raise interest rates again.
So does that make it a good time to refinance? That depends. If you have an ARM that is currently adjusting, then it looks like your payments will stay the same at least for the next 6 months. But if the Fed decides to raise interest rates again, then more increases in your monthly payments are on the way.
At this point it is impossible to tell what might happen. Interest rates may rise, but they may fall as well. Most likely, they will be staying the same for many months to come. It looks like now may not be the time to refinance unless you are barely scraping by at the current payment you have to make. Then a fixed rate mortgage will offer the security and stability; the peace of mind you deserve.
