As we head into fall, mortgage rates in the US have risen slightly, inching up slowly.
With rates slowly increasing it means that homes are more expensive for buyers and coupled with the pressure of competing for a low inventory of properties, making it harder and harder for buyers to get into the real estate game. There’ve been multiple bidding wars, especially in parts of the country that have been popular as people are moving out of the big city and into more urban areas for more space and breathing room during the pandemic.
Mortgage Rates Are Going Up – What to Do
According to the National Association of Realtors, the index of contracts to buy previously owned homes went down in February and while much of the real estate boom ended up being fueled by shifts brought on by the pandemic, last April 2020 was a tough month for real estate because of the lockdowns. Naturally, this pushed all of the buyers and sellers down the line a bit, and with the added urgency, gave way to very little inventory and higher real estate interest rates.
Refinancing has also started to slow down which could be slightly problematic for the mortgage industry. They had a record refinance in 2020 but it’s possible that borrowing costs could continue to go up and yields for the 10-year treasuries are also climbing. The rate trajectory for the rest of the year relies on the strength of the economy. There is plenty of optimism thanks to the vaccines but mortgage rate increases are showing the foreshadowing of a very strong recovery. However, if that doesn’t come to pass, rights may stop their decline or start moving in the other direction.
Places like Mortgage Bankers Association expect rates might go as high as 3.6% by the end of the year. (subject to change) So what is all this mean for buyers and sellers? Many analysts are expecting a significant pullback in refinancing and we might actually see a slowdown as we head into late summer. Even though the expectation is that mortgage rates will go high enough to slow refinancing, there are still fairly low for homebuyers. Many mortgage experts believe that there will be a record volume of new mortgages and 2021.
While the Federal Reserve doesn’t directly set mortgage rates, it does lend itself to an environment that adjusts the rates and if the federal government cuts rates when the pandemic rest session started, they have continued to signal that they will keep rates low. There is a correlation between the rate on a 10-year treasury bond and a 30-year mortgage. Most people think that short-term rates will be around zero through 2022 and only begin to slowly increase in 2023.
Bottom line, if you are considering buying, now would probably be your best bet. There’s more inventory on the market now than any other time of the year and rates will continue to be low. While it’s tough to buy a home in this market, especially if you’re financing the entire thing, it’s not impossible with the right team and the right preparation.
Bottom Line
Rates are still favorably low, which means it’s a great time to buy house for first-time home buyers or refinance and pull that cash out for college, major remodels, pay off debt or other major expenses. Homeowners are in a great position right now to refinance and if you can drop at least one full point, do it. Rates are even better for 1- and 15-year mortgage terms. Get that home paid off faster.
Ready to see how your payment could change or how much home you can afford? Contact me today at any time!
