Lubbock mortgage expert explains Fed rate hike - KCBD NewsChannel 11 Lubbock

Lubbock mortgage expert explains Fed rate hike

Greg Luman, Hometrust Mortgage (Source: KCBD Video) Greg Luman, Hometrust Mortgage (Source: KCBD Video)

There could be a headache for some homebuyers as the Federal Reserve increased its benchmark interest rate a quarter point on Wednesday.

This makes the second rate hike in three months.

While this may sound concerning, one Lubbock expert advises homebuyers to not hit the panic button.

Greg Luman has worked with mortgages for 15 years, most of them through Hometrust Mortgage. He said he receives countless concerned phone calls and emails after a raise like this.

"I have all of these homeowners who are out looking for houses," he said, "and they're immediately concerned that their interest rates just went up a quarter-of-a-percent because they say that the feds raised the rates a quarter-of-a-percent."

But Luman says that is not true.

"There is not a direct relationship between mortgage rates and the federal rate," he said. "Short-term rates are better today than they were yesterday…which that is why I say it's not correlated directly to what the feds are doing."

Luman said these currents rates were actually artificially low.

"It was the feds themselves that were buying the mortgage-backed securities and the bonds to make the rates lower," he said, "and they've since stopped doing that, and so you're starting to see rates go back more in tune with the market."

Luman believes the timing has to do with Donald Trump becoming president and how the economy is building strength.

"The feds have been waiting for unemployment numbers to look better and inflation to start picking up steam," he said, "so all of these initiatives that Donald Trump announced…that's really when we saw rates pick up was right after the election."

But with more quarter-of-a-point raises expected in the upcoming months, Luman does expect a mortgage rate raise toward the end of the year.

"Let's say that mortgage rates did go up a quarter of a percent," he said. "What does that really mean to a consumer? It's about $30 a month difference on a $200,000 loan. So you're not talking about a huge, significant impact."

With that in mind, Luman said his advice to home seekers is to keep shopping.

"I think we all have areas where if that house means that much to us and we want that house, we all have $30 a month in other things we could cut back on to make that budget work," he said.

For anyone in contract to purchase a house who has not locked in a rate, Luman said now is a good time to do that since rates are still near their all-time low.

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