Feds increase interest rates for third time in 16 months

The Federal Reserve voted by a 9-1 margin Wednesday to increase the key short-term rate for the third time since December 2015.  The rate will increase by a quarter of a percent to between .75 and 1 percent.

The housing market has been gaining steam in recent months.  The mortgage rate of a new home rose by 3.7 percent from December and 5.5 percent from November, according to the U.S. census bureau.

The rate hike should have little effect on auto and student loans, along with mortgage rates, which saw an increase in January.

Most likely to be effected are credit cards, home equity loans and adjustable rate mortgages.

Dan Varda is a branch manager with Movement Mortgage in Salisbury.  He says the increase is a great sign of the growing strength of the housing market and the economy.

"It's an exciting time.  I mean this is a great sign and it shows just how much our economy has grown the past six-plus months, 12 months.  To be able to set a benchmark for increasing interest rates and to hit that shows that we're on track for where we expect to be."

Delmarva has lagged behind the nation a bit in the recovery from the 2008 market crash.  Realtor Erik Brubaker says Delmarva's housing market will not be effected adversely by the rate hike, but by the inventory of houses on the peninsula.  He says too often he has clients bidding against other buyers which causes his clients to lose buying power.

"The housing market is fairly strong right now.  Around the cities Baltimore, D-C, Philadelphia, it's very strong.   Our's is starting to come around, we still have low inventory as far as houses to be sold."

He went on to say he agrees that the hike is a promising sign for the nation's economy.   However, Brubaker added that middle class home buyers might need to make some tough decisions, such as not adding that extra bathroom they originally wanted.

Despite recent raises in rates, Delmarva has also seen more activity in the market. 

Verda says the last three weeks has seen an increase every week in mortgage applications.

"So we've actually seen a nice uptick here on the Delmarva peninsula in terms of the housing market.  And I don't think this is going to hinder it.  We really haven't seen an aversion to interest rates rising, they have been rising slightly for several months."