How Mortgage Rates Are Affecting the Buying Market
How are increasing mortgage interest rates affecting the housing buying market now?
Interest rates are no longer at 50 year all time lows. That’s a fact. However, consider this, neglecting the past few years, interest rates are still the lowest since they were 40 years ago. And that still presents a tremendous opportunity with regard to historically low interest rates. Buyers need to know this will not change the current “seller’s market.” Where supply of homes on the market is still relatively scarce with respect to growth of housing needs, and this bump in interest rates won’t change that.
Yes, I still get questions from clients about increasing interest rates. We are all used to seeing low rates for so long. With rates below 4% over the past couple years, Millennials in particular struggle with the idea of taking out a mortgage at rates exceeding 4%. When inventory is low, like in today’s housing market, small rate bumps don’t matter because there is a housing shortage and people still need homes. Smart buyer’s get pre-approved and set themselves up to act quickly, rather fretting over current interest rate trends.
Millennials make up 68% of the buyers, yet are the most hesitant to take on any form of debt out of any demographic, including mortgages. They consider an increase of 4% to mid 4’s as a big jump. Understandable because this group is not old enough to have endured the high rates of the mid 80’s, where rates were in the mid-teens, 13, 14, 15% mortgage rates! In actuality, an interest rates increase of .125% only amounts to about $8/month for a $100,000 mortgage. (.125 up or down in interest rate is a 8.00 difference up or down per 100,000.00 in loan amount)
The FHA has recently increased the maximum mortgage amount by $24,240, from $332,250 to $356,500, which equals more buying power. For conventional loans, the max mortgage limit is to $453,100 before a jumbo loan is needed. With these changes, there are even more buyers ready to buy.
There are many ways Paula & Co. can assist with your mortgage and home search. Let us help review your mortgage alternatives while we assist you in finding your dream home. Our team can help set this up in advance, so that you don’t lose out to others on new-to-market homes. Some of the best homes never make it to the MLS, but you need to be set up as a preferred, pre-approved client.
So how are increasing mortgage interest rates affecting the housing buying market now, they are not affecting it. Curious to learn more or wanting more information on becoming a preferred and pre-approved buyer, please contact Paula & Co., we are happy to help.