It's undeniable that mortgage rates are finally starting to rise. At the point at which I'm writing this they're hovering around 5%. When was the last time you saw average mortgage rates this high? (Hint: It's been a few years)
Rather than dive into the economic complexities of the whole mechanics behind rates, let's talk about how it affects buyers and sellers.
How does it affect buyers?
Aside from the obvious fact that rising rate equate to higher monthly payments, there are a few other issues to think about.
1. If you are currently in a contract to buy a home, and it's an extended closing (more than 45 days, you may not have locked in your rate yet. Definitely talk to your mortgage advisor about their predictions for what can happen to rates between now and your closing date.
2. If you're shopping and not in a real estate contract you should give yourself a little wiggle room by anticipating interest rates that are a bit higher than what we've been enjoying.
How does it affect sellers?
Buyers seem to be more concerned with budget than price. What this means is that they're looking at their monthly overall spend and fitting their life costs into their income. It's even been said that people don't necessarily believe that they'll ever pay off a mortgage, they're simply getting as much home as they can get for their budget.
But you care about the overall selling price because you're a seller! Rising interest rates affect how much your prospective buyers are willing to spend because, regardless of whether or not the selling price is supported by an appraisal, they can only spend within their monthly means.
So, is it time to sell? If you believe, like I do, that rates are not going down in the near future, you may want to get a move on and list your home. (With me of course;)
So, is this good or bad news?
Well, it depends on your view of things and what benefits you most. For sellers and buyers it's not the best news on the surface of things. Rising rates don't typically make real estate transactions smoother.
However, rising rates are often an indicator of increased confidence in our economy. Whether or not this is true remains to be seen. But let's hope for the best!
I can help...
I love discussing strategy with new and prospective clients. If you want to chat with me about your particular situation just give me a call. Or let's get a cup of coffee! (Or chai:)