Interest Rate "Indifference" ... it Can Cost You
Interest Rates are talked about endlessly ...
- Will interest rates rise ... or won't they?
- How big will the rate hike be?
- How soon will the Federal Reserve Board raise its benchmark interest rate?
- What indicators could influence a decision?
- How will an increase effect the markets?
- How will an increase effect housing and financing?
- More ...
Speculation regarding interest rates and their rise has been going on for almost a full year now. In fact, it's been non-stop since the Federal Reserve Board last took action and raised rates in December of 2015. That move proved momentous, as prior to that action it was June of 2006 when a movement in rates was last seen.
But because Mortgage interest rates have held steady for so long ... , home buyers and borrowers have been lulled into somewhat of a coma. They've come to think any talk of changing rates is hype or media "buzz".
And after such a lengthy time of stable low rates and many false alarms regarding an interest rate hike, it's easy to see why home buyers might feel that way. And why they might have grown a bit deaf on the topic.
Right now, I'm seeing real proof of that "indifference" or "deafness" in many of my mortgage applicants. Many are falsely assuming that Interest rates will remain low indefinitely. They think the periodic "noise" heard regarding rates rising is of no real concern.
Unfortunately, that's not true. History has taught us that.
What's also unfortunate is that deafness ... that indifference ... has caused real stress and concern in a couple of my most recent transactions. How and Why?
Over the last 30 days or so, the financial market has been in an upward swing. And interest rates have been reacting to the market and following suit.
Now it must be pointed out that it's always important that loan applicants remain engaged and in communication with their Mortgage Originator. But it's especially important around interest rate lock time.
It's been at this crucial point in the process that a few of my clients have gone AWOL, disappearing on me for days.
In each case, it has cost them. Interest rates, and their changes, wait on no one. And that translates to dollars.
Expectations are that the Federal Reserve Board will raise rates at their next meeting. The recent election has fed into that speculation, as there has been a significant uptick in rates following that event.
But the election isn't the only factor that contributes to this speculation. Mortgage Interest rates react to a variety of changing or volatile factors, and change DAILY, not just when the News Media decides to talk about Fed decisions.
Other factors include:
- Bond Trading
- Political Factors
- Economic Indicators
- World Events
- Inflation Rate
- Federal Reserve Board actions
- and More ...
Add to that: Mortgage interest rates were at historic lows in 2013 and near that once again during 2016. It only stands to reason that interest rates will continue to, or likely will, be on the rise in the long term.
Given all the factors above ... plus recent activities, financial experts are predicting that interest rates will change and we'll finally see the Fed take action ... soon.
Many of my younger or first-time home buyers are of the age that they know nothing but the current low interest rates. Horror stories of multi-digit interest rates experienced during the 80's are just that to them ... stories. As fictional as many movies or books.
What most do understand though, is rent is rising on their apartments, condos, homes. Rising to a point that often buying a home and paying for a mortgage would provide them financial relief for housing.
THAT single point grabs their attention and motivates them to contact me. But discussing the steps and details of actually securing and processing their mortgage? That causes their attention to wane.
Borrowers can't afford to have that happen ...
Each stage of the mortgage process is important. Even the more boring or mundane of them. And that's really important to remember right now as interest rates have been more volatile and trending upward. Any indifference shown ... or delay in communication with their LO ... has real potential to cause stress and cost them money.
As the old saying goes, "Timing is everything" ... and that is certainly true when it comes to interest rates.
Stay engaged and stay in touch with your Chicagoland Mortgage Originator throughout your entire mortgage process. From first contact to completion.
Respond and respond in a timely fashion to their requests and communications. Doing otherwise could cost you ...
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