Will An Increase in Mortgage Rates Affect You?

It's increasingly important to trim budgets as much as possible this summer. One of the biggest areas of concern is mortgage payments. Loan rates appear to be on the move, and those changes may have a direct impact on your monthly expenses.

Mortgage rates for conventional 30-year fixed loans have risen to their highest level in eight months, and it's widely anticipated that they'll go as much as 30 basis points higher in August. The Fed has to start raising rates to avoid dangerous inflation and provide urgently needed support for the falling dollar, so an upward move is inevitable. When it finally happens, the maneuver will probably signal the beginning of a long and painful series of hikes. The Fed lowered its fundamental rates during the first few years of this decade, and mortgage rates fell precipitously. Now that the decade is nearing an end, so is the lower mortgage rate trend.

Mortgage rate considerations

Here are some things for the average American to consider:

• Those trying to acquire a mortgage can expect to pay higher rates going forward. Locking in a lower fixed rate right now-not tomorrow-is probably a wise move.

• Many borrowers who took out $200,000 mortgages at the beginning of July, for example, wound up with monthly payments that are $35 to $40 lower than those who took out the same kinds of loans just one week later.

• Homeowners with an adjustable rate mortgage can expect to see their monthly payments expand and rise like helium balloons. Ditch them, or repay them as soon as possible; otherwise, they may invite disaster.

• Sellers will face challenges, too. With higher rates, it's harder for buyers to qualify for adequate financing. Cutting prices, or helping with buyer closing costs, may help close deals that are in the works, and homeowners may want to consider such measures.

No mortgage-still problems

Mortgage rates will have a financial impact on you, even if you don't happen to have a mortgage. That's because we all depend upon banks, credit card companies, student loan lenders, and others in our interconnected and interdependent market place.

• Maybe the mortgage on your doctor's office, your car mechanic's shop, or your student dormitory will go up and the doctor, mechanic, or university will pass the added cost along to you, the customer, by raising prices for the services offered.

• Maybe you don't have a mortgage but you have a credit card. The bank that issued it may raise your rate in order to compensate for its own losses in the mortgage market.

Everyone paying debt is advised to pay close attention to the direction of rates and act fast to minimize the adverse financial impact. The landscape of the financial industry isn't just changing; it's suffering from tremors and earthquakes. Now's the time to execute emergency plans and seek protective shelter from higher mortgage rates.