Rates Rise Then Stabilize…but still higher than 3 months ago.

Rates Rise Then Stabilize…but still higher than 3 months ago.

mike@TheMurrayHomeTeam.com

7/31/13

Since last month we have seen significant upward movement in the interest rate marketplace after years of record lows.  Most industry experts and economists have been warning that sooner or later the ‘easy-money’ that the Federal Reserve has enable will soon come to an end and when it does it will send shock waves through the housing industry.  Well rates are on the rise but we haven’t seen the shockwaves just yet. 

Since June we’ve seen conventional mortgage interest rates jump from the mid to low 3% range to as high as 4.75%.  As of this post we are probably closer to 4.5%...but anyone who watches the market knows that rates change slightly up and down everyday.  This rate jump won’t put  buyers back on the sidelines but instead give them another reason take the buying plunge now so they don’t end up in the 5% bracket later down the road.

My concerns are not about scaring would be buyers off, though I do think 6% rates would, but instead limiting them for what they are qualified to buy and possibly reducing average and median sales prices in our area after we have finally seen stabilization somewhat after years of declines.

Take this scenario for example:

The average sales price in Severna Park year to date is $506,000(Up 3% over the same period last year.)  If you were to put 20% down on home at that price your mortgage amount would be $404,000.  With an interest rate of 3.5% your monthly Principal and Interest would be $1814 on a 30 year mortgage.  At 4.5% the payment would surge to $2047 per month.  Almost a $235 difference…or the cost of a small car payment! 

With mortgage underwriting getting harsher on debt to income ratios this additional rate lift will price some buyers right out of the bracket they have been shopping for over the last 6 months.  If you are in the market for a home and have been searching for more than 2 months keep in touch with your Mortgage Loan Officer weekly to keep abreast of the movements in the rate market and how they may affect you.  Also, we have qualified licensed loan officers that we work with that have long term rate lock and rate guarantee programs that may help you.  Contact Melissa or Mike Murray today with any questions - (240)508-7246