I’m going to put on my old financial advisor hat here for a second and try to explain what today’s FOMC decision means for a lot of people out there…The Federal Reserve said they are going to keep rates low through late 2014. Since all interest rates are loosely pegged to the Fed Funds Rate, it means we have some time before we see surging interest rates.
Of course, the Fed could change directions at some point, but the key takeaway here is that we have a fair amount of comfort in knowing that the 10 year yield is unlikely to see 4%+ in the next year (or probably even 18 months). And that means one big thing for a lot of Americans – the Fed is giving you time to refinance and/or consider buying a home. You don’t need to panic over “record low interest rates” or rush into making one of the biggest decisions of your life.
So the key takeaway from today’s FOMC decision – don’t be the fool like so many during the last debt binge who got suckered in by low rates and advertisements claiming rates “won’t last long!”. Be prudent. Understand the facts behind your home purchase or refinancing. Take your time. Rates aren’t going to make housing unaffordable any time soon….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.