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Earlier this month, I mentioned that the Fed was likely to hold the benchmark interest rate steady at two percent for the rest of 2008. However, after analyzing the minutes of the Federal Open Market Committee today, I want to introduce one caveat to potential buyers and borrowers in the market; the Fed’s next move is anticipated to be an increase.
The Expectation
We’ve seen it with home prices, and we will see it happen to the fed fund rate - except in this case, we have nowhere to go but “up”. Since Bernanke’s last campaign to get a hold of this credit crunch, the benchmark rate has been held steady at two percent. But as policy makers expect to make a move to eventually slow down inflation, we should expect the fed fund rate to slowly climb back up.
Now according to a report by Bloomberg, analysts predict a “92 percent probability that rates will stay steady during the next FOMC on September 16 and a 83 percent probability for the October 28-29 meeting.” So while most agree that the increase will not be anytime this year, the increase would not come as a surprise if it rates increased in the beginning of next year.
Your Assessment
First, figure out how this expectation will soon affect you - yes, I’m talking about those HELOCs. I’ve mentioned it before, but this benchmark rate has a direct effect on your interest rate which means higher monthly payments. As a result, if you were considering a HELOC, you should definitely keep in mind this piece of news and analyze the recent trends of this key rate. While this volatility is expected among HELOCs, take advantage of this knowledge beforehand to carefully plan your next financial steps.