The government reported Friday that the economy created 211,000 new jobs last month, while theÂ unemployment rate held steady at 5%.Â
While Federal Reserve Board Chairwoman Janet Yellen has recently said that she would not make a decision about interest rates based on this particular report, the numbers are seen as giving Yellen and other central bankers the green light to raise interest rates when policymakers meet later this month.
“The report represents an ideal scenario for the Fed. It is healthy enough to allow them to proceed with the rate liftoff on December 16, without being overly strong that would require a quicker pace for the rate normalization process,â€ Â says Anthony Karydakis, chief economic strategist at Miller Tabak & Co, LLC.
While headlines about rising rates are unsettling, it’s important to remember that rates are at historic lows and Ms. Yellen & Co., are at minimum, a slow and steady bunch.
“This is not going to be like the previous rising rate cycles where the Fed raised rates at every meeting,â€ says Greg McBride, chief financial analyst at Bankrate.com. Â “Once the Fed starts, they’ll pause in between moves to assess the economy. The pace will be gradual, and the ultimate end points for interest rates will still be a lot lower than we’ve seen in past years,â€ he adds.
McBride does caution, however, that consumers must be mindful of the fact that even though rates will remain low by historic measures, they will still feel the effects in their budgets, particularly homeowners with adjustable rate mortgages.
“The cumulative effect of a rate hike over the next few years could mean a few hundred extra dollars out of your budget each month if you have an adjustable rate mortgage. Now is a great time to refinance into a fixed rate mortgage. At the moment, an adjustable rate may be lower, but that will change as rates move higher. A fixed rate offers permanent payment affordability, and you know what it’s going to be each month,â€ says McBride.
As for prospective homebuyers feeling pressured to lock in rates while they are low, McBride and others say relax. Mortgage rates are not going to skyrocket and home purchases should be based on life events, such as a job change or needing more space for a bigger family.