Tuesday, March 28, 2006

Federal fund rate takes a hike!

The Federal Reserve hiked the federal funds rate one quarter point today up to 4.75%. That's the highest it's been since April of 2001. That's also the 15th time in a row they've done the quarter point move. The prime lending rate has also moved up to 7.75%. Expert predictions say there will only be between one and three more hikes ranging from 5 to 5.5% . The hikes make me nervous and excited at the same time, I'm excinervous. When I think of how these raises will affect me, some catagories make me happy, some neutral and some worrysome. Let's see, in the happy catagory we have our savings and future money market accounts, nothing but good news there, keeping hiking! In the neutral catagory we have credit cards, eh, we only have a few with low and pretty decent interest rates. We hardly carry balances, and the rates are very negotiable. Now the worrysome catagory...our mortgage. We have a 5/1 A.R.M. Ya see, before getting married 1.5 years ago, we wanted a house, but wasn't able to afford a decent one in the midst of the housing boom. We decided to save up for one in the early years of our marriage and wait until the market deflated a bit. We also decided we didn't want to rent in the mean time, felt it was a waste of money. We saved up a bit of cash and settled for 20% down on a low priced condo. We got the mortgage thinking we'd be containing some of our money and even making it grow. We'd also have low payments which would help us save. We plan on selling it before the arm is up, or at least until one year after it, during the first cap. But what are the interest rates going to be like in 2009? And the housing prices for that matter? Eek. Another item in this catagory are our I-Bonds, purchased in October and currently 4.80%. With inflation trying to be controlled by these hikes, there are rumors the fixed rate will drop to 0%, and could go even lower? Yikes! And i'm not quite sure what higher rates do to the market, but what about my stocks?! I think I need to analyze other positive factors about the rate hikes to help sooth myself....another post perhaps.


Steve said...

I cant find your email on your blog, but exchanging links is fine. Ill add ya tonight.

John said...

Hm, that's because I didn't put one on, doh! Just added it. Thanks!