Throughout the last few years, the interest rates on loans, including car and home, have been kept low by means of the efforts of the U.S. Federal Reserve. As the economy has begun to show signs of improvement, there have been discussions about when the Federal Reserve is going to take the bridle off and let the interest rates begin to rise.
Those who can refinance their properties, including homes and rentals, have done so. In some cases, they have refinanced several times, pulling out cash as the values of their properties have begun to increase. For renters, this time of low interest rates has brought the option of an affordable house payment within reach. Thus, there are renters attempting to join the world of home ownership to avoid being priced out their preferred neighborhood as rents continue to rise.
Interest rates will remain low
For many of the renters that still wish to purchase a home, the question is how much longer will the Federal Reserve continue to keep the rates low? That time period is a factor in whether to pull the trigger now or continue to save and increase the size of their down payment prior to their purchase.
It is important to understand that there are multiple factors involved in determining whether to raise interest rates. One of the more critical factors in inflation. When inflation is low, increasing interest rates can mean a slowing of economic growth. At this time, many projections of future growth are still expecting to be minimal, because the low inflation cannot sustain economic growth.
Additionally, the Federal Reserve tracks unemployment and other factors which give them a more detailed picture of the economy. When this picture emerges, their observations assist them in deciding to raise interest rates. The Federal Reserve was expected to announce an interest rate increase in the fall, but they delayed it based on factors such as future growth.
Analysts suspect that interest rates will remain low and may even get lower within the next six months. Part of the reason is to continue to encourage labor market growth, as energy prices and goods remain cheap. Even if the interest rates maintain their current levels, growth is not expected to make significant jumps in the near future.
Home purchasing is always an option
For renters, this means that the window is still open to consider a home purchase and mortgage with favorable interest rates. What are the benefits of purchasing now when the interest rates are low? One of the most important is a low fixed rate, which means a lower monthly mortgage payment. Renters can appreciate a consistent monthly payment versus a rent payment that could be going up every year or more frequently depending on the length of the lease.
Mortgage payments, especially those resulting from fixed interest loans, can prove to be more budget friendly over the long term. Yet, there are still obstacles for renters, including saving for down payments in the current rental environment. So while the interest rates remain low, renters who are in the best position to purchase may want to explore the loan options available.