4 Things Mortgage Experts Want You to Know About Today’s Interest Rates
You may have heard about the Federal Reserve’s recent rate hikes to help curb inflation, but what does that mean for mortgage interest rates?
“Inflation has a powerful influence on mortgage rates,” says Kelly Jackson, a broker-owner with Motto Mortgage Home Services. “A lot of people associate inflation with the cost of a gallon of gas or a loaf of bread. You typically get higher mortgage rates during periods of high inflation and lower ones with low inflation.”
As rates continue to rise, buyers and homeowners are rightfully concerned. Here are some of the most-asked questions about today’s interest rates.
Do you think interest rates will go back down?
“Interest rates are not going to return to their ultra-low levels any time soon,” explains Candice Panariso, a broker-owner with Motto Mortgage Financial. “Between the Federal Reserve Board raising short-term borrowing rates, stock market volatility, and the persistent demand, there are no political or economic indicators to apply downward pressure on rates.”
While no one can say for sure where interest rates will be at the end of the year, experts predict that the 30-year, fixed-mortgage rate could be between 4.8 percent to 5.5 percent by the end of 2022.
When should I lock my rate?
“If you are comfortable with the mortgage payment, you should lock your rate as soon as you can in the mortgage process. In an increasing, or changing, rate environment, your best time to lock the rate is now,” Panariso advises.
Panariso also says that there’s a greater risk of rates jumping up than of them coming dropping slightly. “Typical mortgage rate behavior is that rates jump up and slowly come down,” she adds.
Is it better to wait until the rates come down to purchase a new home?
“Buying a new home now, you can expect around a 5 percent increase in value per year — although much higher of late — which will equate to increased equity in the property which will greatly outweigh any slight increase in rate,” explains Michael Tubin, a broker-owner at Motto Mortgage Residential.
Emily Tolbert, a loan originator at Motto Mortgage Signature Plus, also says that waiting is probably not the best option. Housing experts predict continued home price appreciation and the sooner you buy, the sooner you can build wealth.
“If you were to purchase a $400,000 home today and values increased near the historical average of 5 percent, you would gain $20,000 in appreciation over this next year alone,” notes Tolbert.
Will the higher rates mean I cannot afford to buy a home?
“No, there are a variety of factors involved in getting qualified for a mortgage,” says Tolbert. “Working with a mortgage broker that will help you put your plan together is the key to homeownership. Once you have your plan together, you will be able to shop with confidence and work with a known rather than an unknown.”
Tolbert recommends letting your mortgage broker know what your limit is on your monthly mortgage payment. “They can work backward from that to determine a purchase price point.”