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Should I Be Concerned About Rising Mortgage Rates?9/20/2018

What you can expect for the rest of the year 

Here’s what experts anticipate for the remainder of 2018: 

·         More market increases. The fed is expected to raise interest rates again at their meetings in September and December. 

·         A healthy economy that keeps growing. With unemployment rates at record lows and the recent tax cuts keeping the economy strong, business is booming across the country. Hiring is up and firing is down. If you’re an employee, you can anticipate a raise in 2018 and the security of a job you can hold onto for years. 

·         More homeowners choosing to stay put. In 2017, U.S. homeowners gained $1 trillion in equity. This means most homeowners are now sitting on newfound wealth. It now makes more sense for them to tap into their home’s equity to fund renovations on their homes instead of going through the hassle and paying the costs of a move. Cash-out refinances, in which the homeowner takes out a bigger mortgage and pockets the difference in cash, will be especially popular. When homeowners stay put, it can create a tighter housing market which can make prices rise. 

Why a healthy economy means higher mortgage rates 

When the economy is thriving, inflation increases. This causes investors to seek higher returns for their investments. The only way to keep investors interested in mortgage bonds when the economy is booming is to raise interest rates on mortgages. 

It’s more that, though. The Feds want to keep inflation stable so that it doesn’t spike suddenly and trigger a market panic which can lead to a crash or a recession. By gradually increasing interest rates, they can keep the economy growing at a steady, stable pace. 

What do mortgage rates look like now? 

Mortgage rates have already surpassed predictions set by major housing agencies at the end of 2017. As of August 1st, 2018, mortgage rates are hovering between 4.5% and 5% and are not expected to drop anytime soon. If anything, they’ll only continue rising throughout the rest of the year. 

If you’re a homeowner 

If you own a home and haven’t yet locked in your interest rate, now is the time to do so. Rates are only going to continue climbing and you want to get the best interest rate for your mortgage before it gets too expensive to handle. 

If you haven’t already, consider refinancing your existing mortgage to one with a lower interest rate. 

If you’re in the market for a home 

House prices have soared over the last seven years. According to the National Association of Realtors, the average price tag for a home is now $264,800, up by almost 100K from 2011. When you adjust these numbers for inflation, house prices have seen a 33% increase in seven years. 

If you’re house-hunting now, don’t pay more for your mortgage than you absolutely have to.« Return to "The Nest (Eagle's Blog)"

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