Using a Standby Reverse as an Inflation Hedge
After several years of artificially low interest rates the Federal Reserve is beginning to raise interest rates – incrementally albeit. With home values still modestly appreciating across the country and interest rates beginning to rise, is now the window of opportunity for homeowners to hedge against inflation?
The Fed may tighten the money supply as fears of inflation begin to rise. In the wake of the Great Recession, many feared that prices for good would fall. However, that fear may be put to rest and replaced with another – inflation. A recent CNBC article states that a .6% jump in the Consumer Price Index (CPI) in January, pushed the annual inflation rate to a five-year high of 2.5 percent.
Rising prices will put more pressure on older homeowners on a fixed income as the cost of goods and services increase. Rising interest rates will increase the cost of borrowing and also reduce the cash benefit that reverse mortgage borrowers can obtain. In this uncertain economic landscape some homeowners could benefit by leveraging a HECM line of credit as a hedge against inflation, states a recent article in the Wall Street Journal. Older homeowners may want to revisit the ‘wait and see’ approach to getting a reverse mortgage, and rather choose to secure the loan at a younger age.
