With the recent shift in the real estate market and Federal Reserve policy, mortgage rates have been on the climb this past summer. Individuals who have been planning on making a new home purchase may need to rethink their plans when it comes to taking out a loan from their local bank or lending center. Recent reports have stated that the days where low interest rates were plentiful are long gone. The federal government will soon start to pull back on their economic stimulus policies, allowing the housing market to return to a normal pace.
What Does this Mean for Home Buyers?
Higher mortgages means higher prices for homes. It doesn’t necessarily reflect listing prices for properties on the market, but it means if you take out a mortgage loan, you’re going to have to pay more back over time. It’s the harsh reality home buyers will be facing as the country pulls out of the real estate slump caused by the 2006 bubble. The real estate industry is balancing out and the government is pulling back its benefits. If you’ve been on the fence about buying a home, now might be the right time to do (before mortgage rates get higher). Or you can wait it out and see where the market is headed. Our suggestion is talk to an agent and see what direction the Louisville area might be headed.
What Caused the Interest Rates to Rise?
Since May, 2013, interest rates have been climbing steadily, reaching half a percentage point above where they were just one year ago. And they are not expected to slow down any time soon. Since the federal government has remarked that they will be ending their stimulus plan, real estate experts have been keeping an eye on the ongoing rise of interest rates.
What Do the Experts have to Say About This Issue?
According to CNN Money, mortgage rates are currently at the highest level they have been at in the past two years. Rates for a 30 year fixed rate mortgage have climbed up 0.22 points from 3.40% in April of 2013 to 4.51% in July of 2013. The average rate for a 15 year loan has gone up over the past few months 0.14 points to a rate of 3.53%. The reason why the government is pulling back their stimulus program is believed to be due to the current state of the economy. Many think that the rise in employment has contributed to the rise of interest rates. Keith Gumbinger, vice president of HSH.com, states that the strengthening of employment put the bond and mortgage markets back on the defensive side once again, causing mortgage rates to rise. Add that to the 12% rise in housing prices and you end up with bad news for potential home buyers.
Expectations over Mortgage Rates
It is important that all buyers keep in mind that while rates are on the rise, interest rates for mortgages are still much cheaper than they were nearly a decade ago. At that time, rates for a 30 year fixed rate mortgage were close to 6%.
Real estate experts are expecting the rates for 30 year fixed rate mortgages to climb up to 4% near the end of the year, and get closer to 5% by 2014. Therefore if you have been considering buying a home, you should do so within the next few months in order to get the best deal on your mortgage rate.