Warning Regarding Interest Rates and Why You Need to Plan Accordingly

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Marc Cormier of Berkshire Hathaway Pen Fed Realty warns of pending interest rate hike

"Interest rates will soon be on the rise, which means now is the time to take action to ensure you get the best rate on your real estate purchases," Marc advises his customers to heed warning signs of an impending rate hike. Recent market changes, as well as a soon-to-be-released report, could mark the beginning of increased rates and high costs of buying.

Three Reasons Why a Rate Increase Is on The Horizon

The question on everyone's mind is what warning signs have been causing analysts to suspect a rate increase.

The Fed Is Beginning to Ramp Up Their Quantitative Tightening

Starting in October, the Fed began its quantitative tightening, which essentially means they have been purchasing fewer and fewer mortgage bonds and treasuries. This tightening was even more pronounced at the beginning of January and now in April.

Changes in the Stock Market

The stock market has experienced a recent decline in prices and with the S&P meeting its moving average, a bounce back is expected. There is often a cause and effect between stock prices and bond prices. When stocks begin to do well, bond prices tend to suffer. This effect on bonds directly affects interest rates causing them to worsen.

Rising Inflation Will Affect the Fixed Rate of Bonds

Inflation will directly affect the buying power of banks and other lending institutions causing them to raise their rates as a means to compensate for the additional money that will need for them to continue to have buying power.

Personal Consumption Expenditure Report

The report that is expected to start the cycle leading to the increase in interest rates is the Personal Consumption Expenditure Report, or PCE, which is expected to be released by the end of April. The PCE is the Fed's primary way to gauge inflation by measuring the price changes of goods and services. This report, which is issued at the end of each month, provides data on spending for the previous 12 months and calculating an average.

What is significant about the most recent report is that it will not include March of 2017 which was an abnormally low month. With this data being removed from the equation, the expected average is anticipated to cause a significant spike reporting both headline and core inflation at about 2% which is up a half percent from the 1 1/2% recent averages. This is expected to lead to inflation fears which will have a direct effect on the bond market and in turn cause interest rates to jump.

"Save money by making your real estate purchases now and take advantage of interest rates before fears of inflation skew the market and cause interest rates to climb," advises Marc Cormier co-author of “Cracking the Real Estate Code: The Nation's Leading Expert Advisors Reveal Their Proven Repeatable Systems to Help You Get the Best Deal on Either Side of Any Real Estate Transaction.” Marc has spent his long career in real estate providing for his client's wants and needs by being able to stay on top of changes in real estate and lending.

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Marc Cormier
Berkshire Hathaway Pen Fed Realty
+1 (301) 660-6272 Ext: (703) 564-4026
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Marc Cormier
since: 07/2009
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