On Wednesday, June 13, the Federal Reserve increased the Fed’s benchmark interest rate for the second time this year, and for the seventh time in the last two years.  The Fed also signaled that they expect two more rate hikes before the end of the year.

The New York Times reports “The Fed’s optimism about the state of the economy is likely to translate into higher borrowing costs for cars, home mortgages and credit cards over the next year as the central bank raises interest rates more quickly than was anticipated.”

In terms of immediate impact, this means that the Wall Street Journal Prime Rate is likely to increase to 5% in the coming days and to 5.5% by years end.  This will directly affect adjustable loans that are based on the Prime Rate such as home equity credit lines.  This may cause many people to explore the advisability of reducing the balances on their equity lines sooner rather than later while long term interest rates are still low.

People with adjustable rate mortgages that are adjusting annually are likely to see possibly significant increases in their mortgage rate at the next rate adjustment date.  These people may want to explore a fixed rate loan while long-term interest rates are still low.

Those with ARM’s that still have three or more years remaining on the fixed rate period may be best served by standing pat.  Interest rates could well be cycling down again by the time they are due for adjustments.

And those who have taken advantage of the unusually low fixed rate loan environment of the past fifteen years can rest easy with the knowledge that this cycle of increasing interest rates will not affect their mortgage payment at all.

The point is that each situation is unique and requires careful examination and evaluation.  This is the time to do both.

As always, Primex is here to answer any and all of your questions and to help you explore your options and opportunities.  So call me at 301 468-5600 if you are unsure of what your next steps should be, or even if you just want to explore.  And, I hope that you know that your call is always welcome at Primex.