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Why you should not refinance today
Have you heard? Home construction is down 27 percent from a year ago. The ripple effects can already be seen slowing the other sectors of the economy. Yes, this is a good thing for inflation, but what about the home owner? Will your home go up in value, decline in value? How will your home equity be affected?
Lets slow down and tackle these questions one at a time. Slower inflation means that the federal reserve won't increase interest rates, letting the potential buyer loan money from the bank without the sum being more expensive in terms of interest to pay back -- meaning that your home will retain it's value. However, too low of an inflation usually means that the economy is not growing, and may signal the fed to lower interest rates, making it cheaper to borrow money, and hence for the buyer to afford more expensive property, and hence for you to sell your home at a higher price.
So now, since the interest rate increase has been halted, at least for now, borrowing money against the equity of your home might not be the best idea. Following the current trend, the interest rates will most likely not increase in the near future, meaning that they are at their highest point right now, meaning that if you wait you might get a better deal.
What else does this slowdown in inflation and pause of interest rate hike mean? It means that things will not get more expensive, things like your everyday expenses. It won't cause a business to pay more in interest rates, the cost otherwise, past down to the consumer in terms of a price increase. Take for example a shipping company. If the cost of borrowing money for this company doubles, this company will have to charge its clients more money, it's clients possibly including food companies, that will increase the price of their produce in stores, electronic companies, that will increase the cost of their cameras, computers, cell phones in stores, and so on. Since this increase in price will not be necessary, with the expenses being stable, everyone will adjust their pricing strategy accordingly and will soon be making money again. But then, again, once there's extra money, there will be inflation, and the interest rates will rise, until it becomes too expensive for companies to borrow. And after a while the rates will fall, and the cycle will begin again.
Figuring that right now we're a the peak of the interest rates, it is probably in your favor to wait before borrowing money on your home equity, as if the interest rates start falling, you will be able to borrow more at a cheaper price, and who's not in favor of that?
About the Author: Brenda Moore is a home owner who keeps a summary of current events on her blog with the following sections: home equity, home loan online, and bad credit home loan.