The Feds have been teasing about interest rate hikes all year. Will interest rates go up after the Presidential elections? As a matter of fact, in almost all of their monthly meetings, the Feds have discussed raising interest rates. Well, then quit threatening and just do it right? That is what we all may want to say to the Feds because they keep throwing out the possibility of interest rate hikes. Nonetheless, the Feds’ empty threats may finally have some power behind them. Which leaves us all wondering Will Interest Rates Go Up After the Presidential Elections?
First off, the common theme in all of these monthly meetings has been job growth. The Feds were satisfied with current trends. They cited a normal unemployment rate of 5%. Economic expansion is at 2.9% through the 3rd Quarter of 2016. In past meetings this year, the Feds have held back on increasing the interest rates. Earlier this year job growth was slower than expected, which has concerned the Feds about the effect of on the economy.
Will Interest Rates Go Up After the Presidential Elections? There is no correlation between interest rate hikes and presidential elections. Freddie Mac archives that go as far back as 1971 show interest rates by month for each year. A review of this information shows that there is no link between interest rate changes and the Presidential Elections. The Presidential Elections may have no effect on rising interest rates. However, the Feds are still making it publicly known that they are leaning towards an increase.
The Feds have stated that the timing of interest rate hikes have no effect on the actual increase. Whether it is in November vs. December of this year will not make much of a difference. However, they did hold their stance on holding off interest rate increases. Especially during the final days of the Presidential Elections.
The Feds stated that raising interest rates will likely extend the economic growth. Therefore, increased rates would not impede any further economic growth.
Interest rates impact the cost of borrowing money. Therefore, the higher the interest rate, the higher the cost of the loan. What does this mean for a borrower? A higher monthly payment is the result of increased interest rates. Furthermore, the monthly payment that a borrower will qualify for is based on his or her monthly income and monthly expenses.
Conversely, the debt-to-income ratio is the borrowers total monthly expenses divided by the total monthly income. Lower debt-to-income ratio is preferable by banks. A higher debt-to-income ratio is a red flag and could cost a borrower more money. This is because they would not qualify under a traditional loan program. Consequently, a higher interest rate could force a borrower into a lower priced home. Or even yet, disqualify them altogether.
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