Interest rates are going up! Buy now or pay later.

Interest rates are going up!  Buy now or pay later. 

So, this morning an agent walks into my office with a frustrated look on his face.  I said, "what is it?"  He said my buyer on that short sale we're doing doesn't think the property is worth what he's paying and wants to lower the price.  

I sat back in my chair, took a deep breath and said, "explain to me why."  So he explained how his client saw a comp listed in the complex for $12K less and he's hanging his hat on that.  I said, ok, does he know it has one less bathroom and is 100 sq ft smaller? After several emails back and forth between that agent, the buyer and the buyer's lender he decided to keep everything moving forward as is.  I asked, what changed his mind?  He said, "interest rates are creeping up." 

That's right, in case you didn't know, interest rates are going up! Buy now or pay later. So what does that mean for you the buyer?  Well, it means if you're pre-approved for $400K at 4% and your rate changes, for example to 4.5%, that increases your monthly payment by $117.  

So what causes rates to go up or down?  Well, there are a few reasons.  Mortgage rates are traded as mortgage bonds.  They can go up or down in price, much like the stock market.  The better they do the lower the interest rate, the worse--the flip side occurs, they go up. 

Also, mortgage bonds compete with stocks.  You see stocks are more risky with a higher rate or return.  The worse the economic news the the less likely investors are going to invest in the stock market--the better the news the more likely they are going to flip back to buying stocks because they want that higher rate of return. Less money in bonds puts pressure on rates to rise. 

Inflation doesn't help either.  It also doesn't help that Mr. Ben Bernanke is printing more "Benjamins." You see when inflation increases money is worth less.  If that money is worth less lenders charge more for the loan so they can secure future buying power. 

There's obviously more causes for rates to rise, these are the big ones.  I hope I got my point across: Interest rates are going up! Buy now or pay later.