A house is probably the most expensive thing you’ll ever buy. Many people refer to…
Interest rates have been very low over the last year – but will they go up soon? Here are a few reasons why we expect rates to stay low for a while.
Rates Won’t Go Up due to Coronavirus
While a lot of bad things happened in 2020, it was the coronavirus that turned our world upside down. It caused a lot of uncertainty, which is what drove the government to lower interest rates.
But even though there are a few vaccines rolling out now, we don’t expect the rates to go back up soon. There will be long term effects of the coronavirus that are yet to be seen. For example, landlords haven’t been able to evict tenants if they weren’t able to pay their rent. Many local governments are extending that rule for a few more months, but it’s not universal. That means some people may have to leave their homes in the next few months, which will affect the economy.
There are also a lot of jobs that still haven’t come back yet. How can they, when so many businesses aren’t able to operate at full capacity?
All of that said – coronavirus will still be affecting our country for the next 6-12 months. The rates will probably stay low during that time to help counter the negative economic effects, per our next point.
The Fed Announced Rates Won’t Go Up
On December 16th, the Federal Open Market Committee (FOMC) said they won’t raise rates anytime soon. They want to limit lasting damage to the economy and limit the upfront damage caused by the virus.
The committee will meet again in late January, and nobody knows what will come of that meeting. But there’s a good chance it will end in a similar outcome.
Yes, the stimulus in the middle of being passed will help our overall economy. But it’s just a bandaid, and the government needs to do other things – like keep interest rates low – to ensure the economy stays strong.
When Will Interest Rates Go Up?
This is almost impossible for anyone to say. On the one hand, things seem to be getting better. Millions of vaccinations should occur in the next few months, starting with the first responders and people most susceptible to the virus. Then it will start being distributed to everyone else, which should help governments, businesses and individuals feel more confident in going back to normal.
That said – you never know what lies around the corner. The Fed won’t raise rates again until they’re confident that the economy is recovering, which may take anywhere from 1-3 years.
Don’t wait too long to buy a house. Even though rates may be low for a while, the values of homes are still going up. So if you wait too long, you’ll end up paying more money for the same home than if you bought it in the next few months.
Will interest rates go up soon? Based on both the current economic environment and what the FOMC have said, we don’t think so. But again, don’t wait too long to buy your home! It’s better to buy now before prices go up, so send us an email at firstname.lastname@example.org to get the process started.