Category Archives: Austin

How Federal Interest Rates Affect You

With interest rates at a crazy low, it is a great time to look at purchasing, refinancing or moving up-downsizing.  30 year fixed rates are 3.79% from what I read today at Noon (Bankrate.com). There is something significant happening today that may affect these ridiculous interest rates.

The Federal Reserve controls the open market operations, the discount rate, and reserve requirements. The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the Federal Open Market Committee (FOMC) is responsible for open market operations. Using these three, the Federal Reserve influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks and in this way alters the federal funds rate. The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.

Changes in the federal funds rate trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a range of economic variables, including employment, output, and prices of goods and services.

The FOMC meets eight times per year, one of which is happening today. All indications are that interest rates will increase because of the current meeting. That makes it a valuable time to get approved, find a home, lock in, and enjoy low interest rates for the next 30 years, or until you decide to sell at 12% market increase annually, if numbers continue at the current rate (MetroTex).

Call me soon to discuss the current market, strategies and just to say hi. I look forward to working with you and helping you find your next home or investment.  

 

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