If they do, what will happen?! OHHHH NO!!! What will this mean? What will this do to mortgage rates??!

ANSWER: Not what you think… in fact mortgage rates will likely dip DOWN on the news. The Fed controls the overnight bank rate which affects shorter term loans like car loans, credit cards and home equity lines of credit. This is actually a hedge against inflation — which mortgage rates really like.

So credit card payments and lines of credit payments will be increasing. NOW is the time to lock in a long term rate by refinancing out of these variable rate, non-deductible loans while mortgage rates are still incredibly low!!

By the way, its not likely to happen next week simply because the economic indicators that the Fed uses to measure the need for hiking rates have not been strong. Inflation has remained quiet, consumer confidence is anemic and jobs have been improving, but not where they need to be. Maybe December for a rate hike like last year??

The best personal hedge against changes like these that we can’t control — is to control your own economy. Make sure that you are optimized. What does this mean? Making sure that your short and long term financial objectives are addressed on both sides of your balance sheet. Many people simply look at the asset side and just ‘deal’ with their liabilities; however there are significant opportunities on the liability side. I recently helped a client consolidate some of their non-deductible consumer debt, saving over $350/mo. We put a plan in place to rapidly pay down the remaining debt (snowball strategy) which will free up another $200/mo. Plus a plan to max fund their 401K,¬†providing additional tax savings, and putting a college savings plan in place for their 2 young kiddos. They feel prepared no matter what the Fed chooses to do.

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