The strangest thing is happening on the way to higher interest rates and the affect on our real estate market. The mortgage industry has been anticipating a period of rising mortgage rates, triggered by the end of the Federal Reserve’s $1.25 trillion mortgage-securities purchase program. Conventional wisdom held that mortgage rates would rise as the Fed pulled back from propping up the market. Enter the financial turmoil in Europe, which unleashed a massive wave of cash into U.S. bonds from investors around the world, pushing domestic mortgage rates to the lowest levels of the year. Many in the industry now say rates could drift as low as 4.5% this summer instead of rising to 6% as many economists projected.
It makes a big difference to buyers and sellers. Interest rates directly affect payments for buyers considering a home purchase. In terms of monthly payments, a general rule of thumb is that every one percentage point change in a mortgage rate is the equivalent of about a 10% change in the home price for the buyer. The longer current low rates hold steady or drop, the more stable our local market remains. This plateau we are on is a very good time for buyers and sellers. Let’s hold our breath.
Great post! So many agents don’t really understand the “why” behind the mortgage rates and, therefore, can’t explain it to homeowners. You’ve made it pretty concise here. thank you!