Of Intere$t

Posted on December 28, 2021 by The Weekly Commentary

by Thomas M. Riddle, CPA, CFP^®, Founder & Chairman
A group of decision makers at the Federal Reserve Bank (the “FED”) meets periodically during the year. Last week’s meeting led me to strongly suspect the FED will raise interest rates sometime in 2022 and continue through 2023. This action will increase interest rates on variable rate loans such as home equity loans. The reason for the increase is that many home equity loans use a formula to compute interest due on the loan such as the Prime Rate (currently 3.25%) plus 1%, for example. During 2022, some experts are forecasting the Prime Rate may rise from 3.25% to 3.75% – 4%. And, to 5% by the end of 2023. That means borrowers may see their variable rate home equity loan rate soar to 6% during the next two years.

ALERT: Variable rate home equity loan rates will rise in 2022 and 2023 so now is the time to refinance using a fixed rate home equity loan. Another viable option is to combine the variable rate home equity loan with your mortgage and consolidate into a single fixed rate mortgage. Not every bank offers a fixed rate home equity loan. I have surveyed banks in the Lehigh Valley, and I have located two banks which do. Contact me at triddle@valleynationalgroup.com and I will be happy to share the information with you.

PERSONAL NOTES: My family and I are well. My two daughters, their husbands along with my four grandchildren live only 10 miles away (all in the same development). There is a well-worn groove in the road between my house and theirs! Grandchildren are powerful magnets.

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