On Wednesday March 15th 2017, the Fed raised the interest rates a one quarter point. A lot of people automatically assume because of the interest rate hike that they are getting a raise. Your pay may go up slightly, but after adjusting for inflation your wages are flat or negative.
(https://www.bls.gov/news.release/pdf/realer.pdf) Another good source to review:
How this will play out with in days of the rate hike?
Mortgage rates will rise for conventional lending for certain. I would have to assume the rates will also rise for alternative lending space as well. You know the saying “He who has the gold makes the rules.” Real estate investors will have to anticipate interest rate increase to borrow money for investing.
In the real estate arena, investors and home buyers will get hit twice. Once with higher interest rates for mortgages and second higher home prices. Home prices will rise because of inflation with the rising rates. New home construction prices will increase as well because all of the labor, land, and materials will cost more to build the home. In turn those costs are passed on to the consumer.
If you carry credit card debt, expect your rate to rise quickly. If possible, you should pay down your debt before the costs rise for carrying that debt.
If you have money in savings, don’t expect the interest rates to increase because you won’t earn more money on your savings. Your best option is to invest in real estate that provides you with positive cash flow.
Brenda Harper, MBA
I give thanks to Pixabay.com for the lovely picture.
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