Wednesday, September 23, 2009
How Does Inflation Impact Interest Rates?
If you have seen the news lately, you know that inflation is a very serious issue that will likely be on the rise as the year proceeds.
But What Does This Really Mean to You?
The bottom line is that as inflation increases, home loan rates will rise too. That is because lenders know that a rise in inflation actually diminishes the value of the money they receive over the life of a loan, as the money they receive for payment simply will not go as far. So when lenders see changes in inflation or even anticipate a rise, they increase their interest rates to make up for the loss in future buying power that will happen as a result of inflation.
What Should You Do?
Work with a home loan professional who pays close attention to what is going on with inflation–not only with the reports that come out, but also with the concerns that legislators and lenders express. After all, lenders may raise rates to protect their money as soon as they feel the tide turning.
More importantly, if you or any of your family, friends, neighbors or co-workers have been considering a purchase or refinance, this is a great time to act because home loan rates could be on the rise.
Information Provided by Toby Wonder
License #: 510-LO-32290