Interest Rates are Rising
According to Freddie Mac’s latest Primary Mortgage Market Survey, the 30-year fixed rate mortgage interest rate jumped up to 3.94% last week. Interest rates had been hovering around 3.5% since June. If you are wondering why rates jumped so quickly, you are not alone.
Why did mortgage interest rates go up?
With presidential elections, there is uncertainty in the markets as to who will win. Investors don’t like uncertainty. As we got closer to the first Tuesday of November, many investors pulled their funds from the more volatile and less predictive stock market and invested in Treasury Bonds. Once the election was over, investors returned to the stock market and other investments, leaving the Treasury to raise rates to make bonds more attractive again.
Simply put, the better the economy, the higher interest rates will go.
The Good News
Even though rates are closer to 4% they are still slightly below where we started 2016, at 3.97%. The great news is that even at 4%, rates are still significantly lower than they have been over the last 4 decades.
Any rise in interest rates will impact your monthly housing costs if you need a mortgage to buy to buy your home.
Tom Simons, a Senior Economist at Jefferies LLC, explains:
“First-time buyers look at the monthly total, at what they can afford, so if the mortgage is eaten up by a higher interest expense then there’s less left over for price, for the principal. Buyers will be shopping in a lower price bracket; thus demand could shift a bit.”
Real Estate Bottom Line
Even though interest rates have increased recently, rates would have to reach 9.1% for renting to be cheaper than buying! Let’s discuss your situation to determine your best next move in buying a home.