If you’ve been keeping an eye on mortgage rates over the past year, you may have noticed they’ve recently started ticking up for the first time in several months.
Rates had remained under the 3% mark throughout much of 2020 due to the economic downturn. They appear, however, to have hit their low-point in mid-February 2021 at a record 2.65% for a 30-year fixed mortgage.
Here’s what the rising rates could mean for you and the real estate market writ-large moving forward.
It’s not too late.
You might be kicking yourself right now if you’d been sitting on the fence, waiting for the perfect time to lock in the lowest rate possible. The good news is, rates are still exceptionally low.
Currently, 30-year-fixed mortgage rates are coming in around .3% down from last year. While that might not sound like much, that .3% could mean over $750 in yearly savings on your mortgage payments.
That said, the trend for 2021 is moving up. So if you have been waiting for the perfect time to buy or refi, get off the couch, start the loan pre-approval process, and lock in a rate today!
Are rising rates a bad thing?
In a word, no. Historically speaking, rising interest rates point to a strengthening economy. And certainly, there are many positive economic indicators to point to. The recently passed stimulus package, an escalating vaccine roll-out, and increasing labor market optimism all seem to indicate a very robust economy in 2021.
When the economy gets too hot, of course, worries of inflation start to arise. Elevated interest rates help moderate growth to slow the rate of inflation.
What to expect moving forward.
As long as the economy continues to improve, rates are unlikely to fall too significantly. However, a consistently strengthening economy is no guarantee. So, it remains possible we’ll see some volatility in both the economy and, therefore some fluctuation in the mortgage rate.
The Federal Reserve exercises a great amount of influence on interest rates through its monetary policies. And they have indicated an ongoing desire to maintain their “easy money” for the foreseeable future. This should ensure rates don’t climb too far beyond the pre-pandemic levels of 3.5-4%.
Again though, the trend is expected to go up. So if you’re thinking of buying or refinancing in 2021, your best bet is to start the mortgage pre-approval process today.
What do higher rates mean for the real estate market?
Rising mortgage rates do historically turn the temperature down on the real estate market. And that might not be such a bad thing for the current red hot market.
As anyone in the midst of the home buying process will tell you, inventory is low, and competition is tight. As a result, prices are rising – up roughly 10% from this time last year according to the S&P CoreLogic Case-Shiller Home Prices Indices.
Much as rising interest rates help slow inflation in the broader economy, rising mortgage rates are expected to apply downward pressure on rapidly rising home values.
Along with the Spring Homebuying Season, we should expect to see more opportunities opening up for prospective homebuyers.
Good news for buyers should not, however, discourage sellers. This is still very much a seller’s market. And increased inventory only encourages more buyers to get off the sidelines – not to mention upsizing and downsizing opportunities.
Thinking of buying a home or refinancing your current one? Take advantage of this unique moment in the mortgage world. Reach out to your local mortgage specialist and lock in an incredibly low rate on a home loan today!