Home-buyers currently have challenges, and rising rates on mortgages have sparked concerns that they could stall some sales if the buyers already faced financial constraints right after the 30-year fixed-rate mortgage hit its highest level in more than a year last week.
“It’s kind of sad, because you’re helping out a first-time buyer who is in need of these low rates and doesn’t have the personal liquidity to offset (the change) if the rates rise,” one lender in New York told CNBC. He says that he has two clients struggling with the higher rates. “One is on the bubble, but one is almost a dead deal.”
Still, it’s vital to keep proper perspective: Mortgage rates remain historically low.
Buyers fearful of rising rates? Lets put it in proper perspective
The higher rates may hamper some buyers, not just as a result of $50 difference in mortgage payments but because they may have an even more tough time qualifying due to lending’s strict debt-to-income ratios.
“I tell people, interest rates are 80 % psychological and 20 % math,” loan officer Jason Anker, vice president at Salem Five Bank in Waltham, Mass., said. “I do the math for them and their next reaction is, ‘Oh that’s all?’ Forty dollars a month, $75 a month? They initially think it’s going to be a lot more painful than that. … My advice to clients right now is to be extremely defensive.”
Buyers cannot lock in a mortgage rate until there is a signed contract on the sale of a home. However they should realize: A lot of data implies that mortgage rates will edge higher in the coming weeks, in part because the Federal Reserve is anticipated to raise its lending rate in December. While rates on mortgages don’t follow Fed moves precisely, rates could move higher as investors sell out of the 10-year Treasury bond market and head into the stock market.
“In the short term, some prospective buyers may rush to lock in their rate and buy now, while others – especially those in higher-priced markets – may be forced to delay as a larger monthly payment outstretches their budget,” says Lawrence Yun, chief economist for the National Association of Realtors®.
Nick & Cindy Davis work with several lenders here in the Tampa Bay Area, that can assist you in getting the best rate for your home purchase. Let us get started finding you your new home. We’re always just a click here or call to 813-300-7116 away.