Effects of the New Stimulus Package

Home loan interest rates have been moving higher recently, but they’re still at very attractive levels that are close to those historic lows we saw throughout 2020. However, with President Biden’s administration recently passed another stimulus plan in an effort to continue to revive our battered economy many are worried about the effect it will have on the housing market.

The massive new stimulus plan is causing fears of inflationary pressure – and remember inflation is the arch enemy of interest rates.

Initially what the money from stimulus does is create economic activity and some inflation, but after the effect of that wears off, debt takes over and you have to make the payments on that debt. Which leaves less money to generate economic activity and slows the growth.

Think of it like a family that just went to into debt to purchase a new car. The initial purchase creates economic activity, as the manufacture, seller, and dealership all make a little money from the transaction. This economic activity generates some inflation pressure, but it wears off and what remains for many years is the monthly payment on that debt which acts to slow the growth. This is exactly what is expect to happen with the governments issuing stimulus money.

With the stimulus plan going into effect, we believe interest rates will continue to bump a bit higher at the beginning of the spring market. As people continue to gather more and return to work it will alleviate inflation pressure and we will start to see rates relax more later in the year.

If you have been considering a home purchase you have two options, choose from the rate today or the rate in the future. I highly recommend getting locked into a lower rate now while you have the opportunity to. Plus, if you buy into a rate that you don’t love we can always refinance your loan in the future.

Let’s get your loan moving before rates move higher! Contact me today to see how you can benefit before things change.