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Interest rate hike to affect local lending

By Michael Davis

The Federal Reserve's announcement Wednesday to hike a key interest rate for the first time in four years has local lenders and Realtors worried that the decision may signal a slowdown in the housing and loan markets.

A decision predicted to come for weeks, the one-quarter percentage point increase in federal funds rate affects the cost of loans between banks as well as the cost of borrowing money on the short term, such as on credit cards and home equity lines of credit.

As predicted, the rate rose from 1 percent to 1.25 percent.

Angie Wyndham, the financial center manager for the BB&T Bank branch in Jonesboro said that as news of the impending rate hike crept out, customers have been "inquiring more and more about fixed-rates on equity loans."

"A lot of the first-time homebuyers are doing a lot of the interest-only products," which often qualify them for larger loans, Wyndham said. But with the rates on such loans going up in the wake of the Fed's announcement, she said, the higher rate may disqualify some potential homeowners.

"Instead of equity lines, people are likely to do equity loans," Wyndham said, which while they often carry a higher interest rate, the rate is fixed.

But Nathan Moore, the owner of Metro Atlanta Mortgage in McDonough, said that when the Fed raises interest rates, it often creates a misconception that mortgage rates go up.

"The Fed's action may influence mortgage rates, but it's not a direct connection," he said.

"As a consumer, the cost of borrowing money goes up," mainly on credit cards and lines of credit, he said

But Stockbridge Realtor Logan Cook is still worried that people might take it as a signal of an end of the recent housing boom. As land prices and the cost of building materials continue to rise, the average cost of a home climbs commanding larger loans.

If the cost of servicing those loans moves up, homeownership may move out of the reach of some potential buyers.

"Personally, I don't think it will have much effect, but it might initially ? people might be hesitant because they feel like they might have missed the boom," he said.

In his last six years in realty, Cook said many of his customers have been first-time buyers taking advantage of historically low rates.

"It may disqualify some buyers ? who don't make enough money to cover the ratio of debt and income," he added.