Did You Notice Interest Rates Went Up?

Did You Notice Interest Rates Went Up?

This past week has been a wild ride in the mortgage arena, as interest rates jumped up the furthest in such a short time than they have in 26 years. It caught many people off guard, including one of our buyers whose rate jumped an entire point from what they were quoted in April when we wrote their offer on a new home. 

Why did they jump this much? I am not a loan officer, nor a mortgage banker, but I do listen to the news and here is the man-on-the-street answer. Ben Bernanke, head of the Federal Reserve Bank, announced around the middle of June that the economy was recovering and the Fed was going to ease the $85 million a month purchase of bonds over the next year. While we think this is a good idea in the long run, the announcement roiled the stock markets and filtered down to interest rates last week. 

Interest rates are now over 4%! Can you actually believe I am putting an exclamation mark after that sentence? If it were to exclaim how low they are, that would be understandable - but to be indignant over such a low, low interest rate - still probably in the 1950s or 1960s historically - is to show how spoiled we all are that we have had such low, low rates for such a long time.

It's not fun to be on the bubble. Buyers locking right now who were maxing out their payment at the old interest rates are feeling the pain of the uptick, but there are remedies, including buy-downs and just plain points paid to bring the rate back into acceptable range. No, we can't relive the past, but we can lock and hope for rates to slip a bit and use the one-time float down to our advantage.

Inspite of the rate hike, homes are still exceedingly affordable and buyers have not been priced out of the market. Prices are still well below income levels and buyers who buy a home in 2013 may look back and laugh that they were incensed that they had to pay over 4% interest.