The FED Goes Fishing

After months of historically low interest rates in the United States, the Federal Reserve raised the 10-Year Treasury by 20 basis points 4 weeks ago. After the raise, the Fed observed that the market healthily continued to grow, despite the increase. Which led them, last week, to raise rates by another 20 basis points (after a 5 basis point reduction).

What does this mean? It most likely means that before the end of the year the Federal Reserve will raise rates back up from historical lows to more standard amounts. Which means that if you want to refinance your mortgage, or take out a loan, NOW is the time to do so!

Interest rates are an important fact in the economy and affect everyone. But not more so than real estate. In this economy, a New York entrepreneur can get a mortgage on a million dollar apartment complex at 4% interest. Fixed for 10 years on a 30-year amortization. Which means, for the next 10 years, his payment will be mounted on 4% of the loan appreciated at a compound rate. Compare this to a more standard rate of 6%, like acquired in 2008. 2% compound over 10 years is $17,926.39 (on a $750,000 loan). That’s money for your pocket, if you refinance today instead of waiting until December!

Don’t let the Fed catch the fish you should be eating for dinner




Correspondent Ibrahim Abu al-Naggar reports