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Interest Rate Cliffhanger

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The Potential Impacts When the Fed Raises Interest Rates

Federal Reserve Fair Open Market Committee meeting
Federal Reserve Fair Open Market Committee meeting

It’s been a cliffhanger of sorts. The U.S. economy appears to be recovering yet their are fundamental issues that are not resolved. In the wake of the financial crisis of 2009 interest rates have been held at historic lows. Good news for reverse mortgage borrowers and lenders alike.

For several months the word on the street has been that the Federal Reserve would be increasing short term interest rates. Last Thursday the Fed announced postponing any rate increases until later this year, perhaps waiting for improvements in the labor market.  Until then the question is what would the impact be for the federally-insured reverse mortgage?

Jerry Wagner of Ibis Software said “Short-term rate hikes of 0.5% or 1% will have little effect. Long term rate hikes have a big effect as Principal Limit factors will be smaller.” Today Home Equity Conversion Mortgage interest rates are keyed to the…

 

Download a transcript of this episode here.

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