For a few years now, home buyers have been pushed to buy homes to take advantage of historically low mortgage rates. But now, mortgage rates are finally starting to tick back up. In this post, we’ll go over the recent rise in rates and discuss what that means for buyers in the market right now.
Why rates are going up
Mortgage rates are the price of money to buy homes. Banks and lenders are responding to signs of high inflation in the economy in the past few months. The Federal Reserve raises interest rates to keep high inflation in check, and those rises in interest rates push up mortgage rates across the country.
The current national average for a 30-year fixed mortgage is 3.76%, up from around 2.75% in the middle of last year. Furthermore, many economists and financial experts expect mortgage rates to continue to rise in 2022.
The effect of rising mortgage rates on the real estate market
You might be wondering if you missed your chance to capitalize on low rates. It’s hard to predict how rates will move in the future, and it’s also hard to figure out how changing mortgage rates affect the real estate market.
When mortgage rates go up, a few things happen at once. First, it increases the total cost to buy a home, since you’ll pay higher mortgage payments for the same priced house, and those payments are spread out over the life of your mortgage. However, since this makes it harder for many people to buy homes, this can also reduce competition for inventory. This is especially relevant right now, with so many houses garnering multiple bids and even offers above asking.
What you should do in the face of rising rates
If you are currently in the market to buy a home, and you haven’t locked in a rate yet with a lender, it might make sense to lock one in now, in case rates keep going up. If you’re not in the market, keep an eye on how mortgage rates are changing in your area, and on how that is affecting prices and inventory in your market.