It’s that time again: the Federal interest rate is on the rise and showing signs of continuing to do so before the year ends.

So far, the Fed has focused mostly on raises to short-term interest rates, which includes things like credit cards. For the most part, rates for mortgages have been left to a slower climb.

But that is likely to change.

What steps should you take if you plan on taking out a mortgage in the near future? Is now the time to make a move – literally?

You won’t see much immediate change with mortgage rates.

While rates for mortgages are going up, they’re not tied to short-term Fed rate changes, so you won’t see as much of a difference in your interest rate. Taking out a mortgage now is a good idea if you want to lock in current rates and you have the security and means to do so. However, think carefully about fixed-rate vs. adjustable mortgages during this time. A fixed rate will lock you into current terms, which aren’t too bad, but an adjustable rate mortgage can leave you susceptible for the rises that we know are coming. On the other hand, an adjustable rate will let you take advantage of the dips that tend to follow rapid rate raises.

Make sure you have job security.

A side effect of rising rates is a slow-down in many business sectors. Companies tend to downsize or freeze hiring practices given the new costs of doing business. If you’re not entirely confident that your income source is secure, now might not be the right time to take on a mortgage.

It’s not a great time for home equity loans.

While your rising credit card interest rate may be causing concern about debt, taking out a home equity loan at a period like this can mean you’re getting yourself right back into a situation of debt. The Fed has made it clear that higher rates are coming, so focus on paying off your debt without taking on a new one.

 

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