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October 29, 2021

What Does it Mean for Buyers With U.S Mortgage Rates Rising Again?

An increase in mortgage interest rates sometimes points to a rise in consumer confidence. This means that a firming market and rising incomes will help to promote inflation over time. In the past six months, there has been an increase in mortgage rates by more than a half percentage point. The average rate of a 30-year fixed mortgage recently crossed back over 3% before jumping 9 basis points a few days later to 3.1%. However, experts don't expect any significant increase in the 30-year fixed mortgage rate.

No government institution directly regulates mortgage rates. Several broader market factors influence rates, from housing demand to inflation, and even the general health of the economy. Therefore, whether rates go up or down, there remain suburbs where prices are going up or down, irrespective of what is happening to the rates.

What Do Rising Mortgage Rates Indicate?

It's a Sign of an Improving Economy

Experts say that rising interest rates are a sign of economic recovery nationally. Mortgage interest rate increases not only point to increased consumer confidence but also to firming labor markets and rising incomes, which help to promote inflation over time. Higher mortgage rates also point to reducing uncertainty among investors, signaling that the economy is getting better. This makes investors pull money out of bonds which are perceived to be safer into riskier investments such as stocks. In turn, this presses mortgage rates up and raises short-term interest rates. Higher rates point to the economy doing better, which is good for housing prices.

Increased Sales

Higher mortgage rates merged with rising prices result in sales increases. A 25 point increase on a 30-year mortgage at today's price might cost borrowers thousands of dollars over the loan's lifespan, which coupled with rising prices today, means the rates will motivate buyers into buying homes.

The Rates Today Are Still Historically Low

As long as the United States economy is in recession, mortgage rates are expected to remain low. The 3% interest rate is still historically low compared to the 5%-6 % rate 15 years ago. Therefore, this is the opportune time to purchase a home or refinance your mortgage. When the economy is strong and employment rates are low, interest rates will rise since the demand is higher.

Rising Rates Hinder Home Ownership

Changes in interest rates can greatly influence your ability to buy a home. A drop in interest rates lowers the cost of obtaining a mortgage, and this increases the demand for property and pushes prices up. Besides the price of a new home, the availability of capital and the investment demand is greatly affected by interest rates. The flow of capital influences a property's supply and demand, which affects property prices. Thus, an increase in interest rates can sometimes hinder an individual from homeownership.

Fewer Refinances

The most opportune time to refinance your mortgage is when the rates are low. Sometimes, even with rising interest rates, an older mortgage may have a higher rate than those being offered currently. Sometimes an improved credit rating or a decision to lengthen or shorten your mortgage duration could bring refinancing terms that could save you money in the long term. For refinancing to be of benefit to an individual, interest rates must be lower than what you were paying previously. However, you should look at how much of a percentage change in the interest rate you will get and how much money you will save before you refinance.

Hyde Homes Can Help

Interest rates are bound to rise and fall over time, and choosing not to buy a home today might be choosing never to buy a home. Hyde Homes is a company that is dedicated to building quality homes at affordable prices. We offer a wide range of floor plans and communities for you to choose from. Contact us now for more information.

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