Right now, mortgage rates in Baton Rouge (as in the rest of the nation) are higher than they’ve been for 15 months—a trend that’s likely to continue. We have to wonder about the impact higher Baton Rougemortgage rates will have on local home sales in the coming year.
First, some perspective. If mortgage rates do increase in 2014, it’s no ‘done deal’ that home buyers will be put off—nor that a wave of foreclosures will follow. The reason? By past standards, interest rates will still be low, even at the 5½% predicted by the N.A.R. Any hike in mortgage interest rates are coming off the historical 3.52% set in the spring of 2013. Consider: most of us were paying mortgage rates between 7 - 8% throughout the 1990’s! 5½% looks like a fire sale compared with those.
Factor Two: surprisingly, a projected rise in interest rates is not predicted to dampen the enthusiasm for acquiring property. The Mortgage Bankers Association predicts that home sales will increase nationally by 10% in 2014. I have no doubt that some Baton Rouge first time homebuyers could be waylaid by rising interest rates—after all, a 1% increase in mortgage rates equates to approximately a 10% rise in monthly payments. But overall, buyers who can meet the current lending standards should still be able to afford to own. Given the cost of the renting alternative, they may decide they can’t afford to pass up the right house at the right price.
Additionally, there is a strong argument that the principal effect of rising interest rates is less likely to be on Baton Rougehome sales than on refis. The Mortgage Bankers Association predicts that refinancing demand will drop by half in 2014 (when you chart that kind of number, it looks like a cliff!). Many homeowners will already have locked in last year’s interest, so they certainly won’t be interested.
Any drying up of the refinancing business may have yet another effect. There could be a follow-on effect as lenders start loosening their lending criteria to attract new business. First time buyers that have been locked out of the market until then may (we are now two after-effects later, so this has to be a ‘may’) find themselves suddenly eligible for a home loan.
Given the healthier economy and falling unemployment, the outlook for the Baton Rougehousing market in 2014 has reason to look positive. Now is the time to reach out to a great lender, Erica Whiddon with First Choice Mortgage. Did you know you can get pre-approved for your Baton Rouge home loan online? Simply visit http://mylamortgage.com/dupree to get pre-approved online now.
Thinking of selling your home this spring? Now’s the time to call me to discuss timing!
Give me a call now at 225-239-4888