Are you looking to buy a home, maybe to refinance your current home? What is your reaction to all the headlines today now that home mortgage rates are above 4%? Panic or the opposite and put your head in the sand and beat yourself up chanting I should have done so sooner. Thus the following article in a recent issue of Market Matters put out by the CALIFORNIA ASSOCIATION OF REALTORS® made me want to give you a little perspective and if you haven’t done so yet, RATES ARE STILL GREAT.
When I first started selling real estate too many years ago, one of my first deals was what was called a WRAP, far too complicated to go into here, but suffice to say the combined interest rates of the four loans involved, 21%. For a year banks were charging 18% and the only way many homes were sold, the seller carrying back a Deed of Trust for 12 – 14%.
We have become spoiled by this unprecedented era of low interest rates. Looking back over the last 40+ years, the national average for mortgage rates has ranged from the recent historic low of 3.35 to 18.45% according to Freddie Mac, one of the nationwide U.S. mortgage buying entities.
Granted, this rise in rates will make it impossible for a few home buyers and refinancers not to qualify for a home mortgage, but for the vast majority of the others, it is still a phenomenal rate. My two cents of advice, you should act now for there is no doubt rates are going to continue to rise. The only question is when and how fast?
Borrowers who didn’t take advantage of the historically low interest rates likely have missed the opportunity to purchase or refinance using an ultra-low mortgage rate. In the past month, rates have been on the rise and are expected to continue to climb. Fannie Mae’s chief economist doesn’t believe mortgage rates will ever be that low again.
- According to the economist, the Fed is going to stop bolstering the housing market, which has kept rates at rock-bottom levels by buying up to $85 billion a month of Treasury bonds and mortgage-backed securities. That has enabled lenders to sell mortgage loans at low interest rates and recoup their money immediately – plus profits.
- If the Fed stops purchasing the securities, private investors will have to pick up the slack. For investors to do that, the loans will have to offer a better payoff, and that would mean raising rates for borrowers.
- Low mortgage rates generally are a result of an economy in distress. But now, the market believes the economy is getting stronger. Job gains have picked up, and the fact that that hiring is advancing rather than retreating is good news for the economy. Any positive future reports are expected to push rates higher.
- Today’s rates are unprecedented. The ever-popular 30-year, fixed-rate mortgage hit a 37-year low in 2003 at 5.23 percent. It is likely that any return to normal conditions will be accompanied by higher mortgage rates.
Borrowers should keep in mind that even if rates go up a percentage point or two, mortgages will still be relatively low. Historically, 30-year loans are usually 5.5 percent or higher. For clues in the direction of mortgage rates, experts recommend borrowers look at the daily movements in 10-year Treasury bond yields. Mortgage rates track Treasury yields with the difference between them holding fairly constant
Good luck selling yours and if you are looking here, let me put my nearly 30 years experience to work for you and help you get the perfect Napa Valley property, please contact me