Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

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How Jerome Powell Could Affect Your HELOC

Who is Jerome Powell ?

Jerome Powell isn’t quite a household name. Probably because he has only been the Chairman of the Federal Reserve for several weeks.

How will his decisions impact our industry?

Well if we had a crystal ball to peer into…we would already be rich, right? So far he is holding steady with similar ideas to his predecessor, Janet Yellen. He might be even more optimistic at the upturn in the economy, however. He has signaled that he could be increasing rates four times this year instead of Janet’s predicted three.

While this news could be disconcerting for folks in real estate and related fields, we just have to take a peek back at the 1980’s for a little perspective. In 1981 and 1982 rates were averaging over SIXTEEN percent. If we keep that bit of history in mind, we can assuage our clients who have been bombarded with the “rising rates panic” floating around.

For homeowners with HELOC’s they do have to a few things to consider. If rates rise, the payment on their loans can increase significantly with each of these anticipated hikes. Keep in mind that FED rate hikes are in increments of 0.25%. Therefore, four rate increases over the course of a year would equate to a 1.00% rise. On a $75,000 home equity line of credit, that would increase your monthly payment about $50/month or $600 each year. So it’s a good time to analyze if your monthly budget can absorb these payment fluctuations. If not, a refinance into a fixed rate at this juncture would be prudent.

As always with any questions or mortgage needs, call, email or message today!

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