At over 7%, mortgage interest rates are at their highest in 20 years. As a result, mortgage applications are at their lowest in almost 30 years. So what's happening and how can this impact your retirement? Because inflation remains higher than what the federal government wants, the Federal Reserve has been trying to bring down inflation by slowing down the economy.
It does this by raising the suggested interest rates for banks to borrow and lend their excess reserves to each other. This results in even higher interest rates for loans to businesses and individuals, like mortgages, for instance, eventually reducing borrowing because of the higher costs. Less money borrowed means less money spent, and that means a slower economy and less inflation.
Currently, the Federal Reserve interest rate target is around 5.5%. That translates to mortgage rates around 7% and at 7%, the affordability of buying a house is out of reach for more people, which means that fewer people are buying homes. Less homes being bought means fewer applications for mortgages.
How does this impact you, especially your retirement? Well, homes are usually one of the biggest assets of most people. Many people rely on downsizing their home when they retire, which means selling their home and using some of the proceeds to fund part of their retirement. If fewer homes are bought and sold because of higher interest rates, that could mean a delay in some of the income that you were relying on for your retirement. It could also mean less money for your home, if there are too many homes for sale, but not many are being bought.
Because it's risky to try to time your retirement to match with favorable interest rates, it helps to manage this risk by diversifying your retirement portfolio beyond the sale of your home. One time tested risk management investment strategy is to diversify into physical gold. This especially applies to your retirement portfolio.
For example, I have a precious metal IRA which holds physical gold. It's legal. It's easy, and it gives me peace of mind that I'll have some retirement income, whether I can sell my house or not. Mine is from U.S. Money reserve. If you're interested in exploring this option to diversify your retirement investments, call 1-866-646-8465 and ask to speak to a U.S. Money Reserve IRA specialist.
