Be Prepared for Rising Mortgage Rates
Rising mortgage rates in 2023 will likely have a significant impact on the real estate market. Home buyers may find that it costs more to purchase property and existing homeowners may face higher monthly payments. Real estate professionals are advising home buyers to act soon before average mortgage rates increase even further.
Inflation is a major factor driving up mortgage rates. The cost of living is rising and the federal reserve has been slowly increasing interest rates to keep inflation in check. This has caused a domino effect, with banks increasing their lending rates and subsequently, mortgage rates.
The rise in mortgage rates will have different effects on home buyers depending on their financial situation. For some, it may mean that they have to make a larger down payment or agree to a shorter loan term. For others, it may prevent them from buying a home altogether as the increased costs could be too much for their budget.
For existing homeowners, higher mortgage rates will probably mean higher monthly payments, although this depends on the terms of their loan. If their mortgage is adjustable rate, then they are more likely to be affected as the interest rate will change when banks adjust theirs.
The recent uptick in rates has been driven by what’s happening with inflation. Joel Kan, Vice President and Deputy Chief Economist at the Mortgage Bankers Association (MBA), explains:
“Mortgage rates increased across the board last week, pushed higher by market expectations that inflation will persist, thus requiring the Federal Reserve to keep monetary policy restrictive for a longer time.”
According to Freddie Mac’s recent report, the 30-year fixed mortgage rate has climbed steadily during the last three weeks and is now sitting at its highest mark of 6.5% since this year began (as seen in the graph below):
Advice for Home Buyers
Are you tempted to put a pause on your home search due to rising rates? This could be the perfect time for you to finally take that leap and purchase the house of your dreams! The Mortgage Bankers Association recently reported that mortgage applications dropped 13.3% within one week, indicating many potential buyers have started reassessing their search in light of increasing interest rates. Don’t miss this opportunity – it is without doubt an ideal moment for getting into homeownership!
Bottom Line
Although mortgage rates have recently risen, that doesn’t mean you should put off your plans to purchase a home. In fact, it may be advantageous to do the opposite if you want to take advantage of less buyer competition. Connect with me today so we can explore the possibilities in our local market.
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