Since the housing collapse 10 years ago, the U.S Federal
Reserve has maintained a loose monetary policy, keeping interest rates low and
providing easy access to credit.
With the economy nearing full employment and corporate
America raking in record profits, the Fed’s policy is tightening. After years of a fixed 30-year mortgage
interest rate below 4 percent, that rate is now in the mid-4’s for most lenders. It’s only a matter of time before rising rates affect the
housing market.
For prospective homebuyers, rising rates are putting
pressure on finding a home. According to a recent survey by Redfin, 21 percent
of respondents said rates passing 5 percent would increase the urgency to buy a
home, 27 percent said they’d slow their search to see if rates come back down,
and just 6 percent said they’d cancel their search for a home altogether
because of rising rates.
A sense of urgency is justified because the lower the rate a
homebuyer can lock into, the easier it will be to make a monthly payment. For
some buyers, raising rates mean they may not qualify for the home they planned
to buy.
According to a recent economic model by CoreLogic, home
mortgage rates may increase 15% in 2018.
How a rate hike will affect home values is not as clear
because there are so many other factors at play – a new tax law passed in
December 2017, a growing economy where more people are employed, and the X
factor – inventory – which, according to experts, is supposed to shake loose
this Spring, adding much needed supply to our market.
What we DO know on the Easterbrook Team is that everyone
needs a place to live. Our job as
lenders is to provide a happy loan experience for the home they want. Get ‘em in, get ‘em qualified, and let’s get
‘em closed and happy in their new home. Let’s not let rates be a barrier to our
borrower’s dreams.
