Fed raises key interest rate to 5.25%

June 29th, 2006 by christose

The Fed has raised the key interest rate by 0.250% again.

The last four months the continuing increase of interest rates has had adverse effect on the real estate market.

The Fed will continue to raise the key rate for a while.

You can still get a low interest loan, if you take the time to compare loan products in the market and identify one that fits your needs.

There is much advertising, with attractive come ons like 1% interest only payments for loans that the actual interest is 6.875%.

Here is the problem with this scenario.

The remaining payment interest of 5.875%, goes back to the original loan amount and you ending up having a higher loan amount, than the one you started (negative amortization).

If property values continue to rise the negative effect is small.

If property values level or decline, the effect can be devastating. One can have a larger loan amount than the value of the property (1990 era).

Time is of the essence as interest rates are rising.
People with variable interest rate loans are under pressure to meet their monthly payments.

An increase of 1% can increase the monthly payment easely $350 to $ 400 per month.

The increase is approximately $70 per hundred thousand. With the average loan amount of $400,000 in California, it can become a painful experience very fast.

That’s why you need to deal with a professional mortgage lender,who can analyze your individual situation and guide you through the process. We provide this service free to our clients every day and we hear horror stories from their experience elsewhere.

You can contact me at christosel@gmail.com

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