Many Americans considering buying a home may be facing pressure to act as soon as possible. According to a new article by the Washington Post, rock-bottom mortgage rates may be going bye-bye. As our nation's housing market recession comes to an end (even though it has been recovering over the last few years), many home buyers may find that mortgage rates are starting to increase at a rapid rate. Homebuyers have enjoyed low interest rates of under 4% for several years now. This rate has been far below historic averages but an increase in the central bank's benchmark rate is likely to result in rate rises for all types of loans including mortgages.
The average rate on a 30 year fixed rate mortgage have climbed by about a quarter of a percentage from 3.75% to about 4%. This could result in about a $600 a year difference on a $350,000 mortgage. The number of mortgage applicants was about 20% higher this fall compared to last year at this time. Many people are feeling that too long of a good thing simply won't last and many people have either taken the opportunity to refinance or purchase or feel that the opportune time has passed them by. Mounting pressure is looming on the forecast for those that have not either refinanced or purchased in the last few years. Many people the refinanced or purchased 5 to 7 years ago received an extremely low mortgage rate but now, that same mortgage rate would mean they would have to find a less expensive, potentially smaller home in order to keep their monthly payment about the same. Many of these people have simply decided not to sell or move up.
In a recent survey, more than 90% of homebuyers claim that low interest rates was a motivation For Purchasing a Home. Mortgage Bankers Association has predicted that rates on 30 year home loans could reach 4.8% by the end of 2016 and possibly topping 5% in 2017. Rates of not been this high since the beginning of the housing recession. Another analysis found that up to 7% of people who applied for a mortgage during the first half of the year would've had trouble qualifying if rates rose by just one half a percentage point.
The challenge is coming up with a decent down payment. Lower income families are finding this difficult while middle income homeowners have been seeing a very little increase in wages. A small rise in rates could have a large impact on homebuyers and simply an increase of half a percentage point could translate into a 6% rise in monthly payments.
Higher interest rate certainly can affect home sellers as well. People with ultralow interest rates may not want to sacrifice that rate in order to move to a different home. Those that still have to purchase may have to lower their expectations on how much they're willing to spend on a home or in a more desirable location to obtain the same mortgage payment.
One thing is clear, rates are definitely going up and if you haven't refinanced or purchased a home in the last 10 years, now might be literally the best time before rates continue to increase over the next couple of years.
Find out about pre-qualifying for a mortgage in Columbus here
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