Where are Home Loan Interest Rates Headed?

Post sponsored by MonkeyMoney.com.au

We have been going through an interesting time both politically and economically over the last few months. Even experts can’t really agree whether interest rates are going to go up or down. There is a small majority of analysts who think that mortgage rates are likely to rise, but many also think they are likely to remain the same. The only thing that the experts don’t seem to expect to see happen is for rates to fall.

That seems like a fair assessment, given that in many parts of the world, home loan interest rates are so low right now, not just in the US. We’ve just come out of a recession, and low rates are good to stimulate the economy and encourage people to borrow. Increasing rates at this time might put a dampener on the ongoing recovery, but decreasing them would achieve very little.

Why should you care what direction rates go? Well, if you were looking to take out a home loan at any time in the near future, you would want to make sure that you got a good deal, and you might be thinking about whether to get a fixed rate mortgage, or whether to gamble on a variable rate offer.

Fixed rate deals tend to be slightly higher than variable at the time that you sign on to them, but you know that you will have that rate locked in for a certain period of time. If you’re in the camp that believes that rates are likely to go up (which seems to be a common viewpoint), then you should look at getting a fixed rate mortgage. If you’re in the camp that believes rates aren’t going to change, or that they’re going to fall and stay low, then a variable rate is a good option for you.

It’s always a gamble, when you take out a mortgage. You don’t know whether rates are going to go up or down – no-one does. But, given the recent presidential election, and the Brexit vote, we’re entering a period of global uncertainty. England might seem like it’s fairly disconnected from us, but if England leaves Europe, other European states will be watching to see how it fairs. Any major changes to the European economic system will have a knock-on effect on the global economy.

The changeover between Obama and Trump will also have an effect on our local businesses, and that’s going to be something that the Fed will be watching closely. The Fed decides base interest rates. Immigration (something that Trump has been vocal about) affects demand for homes. Both of those things have an impact on home loan interest rates. A strong housing market and low interest borrowing would be an ideal situation for most of us.

It wouldn’t make sense to make an investing decision based on what you read online. If you’re thinking of taking out a mortgage it is very important that you seek professional advice. Compare quotes from several home loan providers, and make sure that you understand the terms fully. Don’t borrow unless you know what you are getting into and you are fully confident that you can pay the loan back. Only borrow what you need, on terms that are fair to you, and remember that if you do not keep up repayments on a loan that is secured on your home, you could lose the property. A good financial advisor will discuss your needs with you, and will be able to tell you the best course of action depending on your financial situation.