What’s going on? Stocks strong; a new Fed Reserve Chair is being considered
Earnings for US companies have been stellar this quarter, and the global economy continues to show resilience in the absence of negative events.
There’s also been buzz in the news over the nomination of the next Federal Reserve Chair. The president is currently considering the famous macroeconomist John Taylor among other Fed Governors and economic advisors.
What does it mean? Future rates could be higher than the market’s original expectations and a December rate hike is almost certain.
The bond market has reacted to the fact that Professor Taylor is a proponent for a more aggressive rate hike path. If he is confirmed, higher Federal Funds rates in the near future become even more likely. The current market-based probability for a December rate hike is now 95.2%.
Why should you care?
While yes, rates have been trending up over the past weeks, with a small dip today, it’s also important to take a step back and look at the housing market from a big picture perspective. In the 1980’s the average mortgage rate was nearly 15%. So even with expected raises, they’re still at near record lows.
The bottom line? With low rates, it’s still a great time to buy a home. And as home values continue to rise, loan-to-value ratios are going down on existing mortgages. That means it may be in your best financial best interest to refinance, especially if you have other debt burdens with higher interest rates. A cash out refinance could make a lot of sense.
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