US Mortgage Rates Reversed Course
It appears that the 30-year decline of interest rates is over. The chart above shows US mortgage rates reversed course. “Based on Freddie Mac’s latest Primary Mortgage Market Survey, after plateauing in recent weeks, US mortgage rates reversed course and reached a new high of 4.61% last seen eight years ago.” Just last August the 30-year rate was about 3.8%. That’s a 21% increase in rates in nine months.
According to the World Property Journal, “Healthy consumer spending and higher commodity prices spooked the bond markets and led to higher mortgage rates over the past week. Not only are buyers facing higher borrowing costs, but gas prices are also currently at four-year highs just as we enter the important peak home sales season.”
US mortgage rates reversed course?
A different reason comes from Martin Armstrong:
“The Fed is clearly using code words like “normalize” interest rates BECAUSE they see the crisis brewing in pensions. They are BY NO MEANS raising interest rates because of inflation or expansion in the economy that risks a bubble. The Fed understands the crisis that has resulted from the manipulated low-interest rate policies.
[…]
“So forget inflation and the usual scenarios attributed to central bank policy. We are facing a pension crisis, and the Fed understands that much so they are trying to “normalize” interest rates and that has nothing to do with jobs or inflation.
US Mortgage Rates Reversed Course
“While this year’s higher mortgage rates have not caused much of a ripple in the strong demand levels for buying a home seen in most markets, inflationary pressures and the prospect of rates approaching 5 percent could begin to hit the psyche of some prospective buyers.”
There are consequences of higher rates.
- Higher rates will stretch the budget of homebuyers. It may result in payments too high for their budget.
- Higher US mortgage rates could limit the supply of homebuyers’
- The higher rates could cause home prices to fall with fewer qualified buyers.
- Rates moving higher could slow the economy, which is what they are intended to do, and push leveraged businesses over the edge.
Are you ready to buy a house?
- Before house hunting, get pre-qualified – talk to different lenders and see who offers the best rates and terms, and manageable fees and costs. Lender fees can vary quite a bit from one to the next. Pre-qualification gives you great information about how much house you can afford and allows you to move quickly if you find the right house.
- Get professional help – Find a realtor you can trust. A realtor has years of experience that can help you with everything from the area, the appraising of a dwelling, the paperwork, the comparisons, and negotiation on price. If you need help finding a qualified agent, JT Integrity Properties knows many agents we can refer you to for your first home purchase. Keep in mind that can also help you find your dream home. Sometimes we allow buyers to choose finishes in the house before we have finished the rehab, that way you can customize the home to your liking.
- Always hire a home inspector – You should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.
- Beware of sleeper costs – Comparing the monthly mortgage payments to paying rent is only part of the story. The bank may require property taxes and insurance to be part of the monthly mortgage payment. Then there’s the unexpected. When a couple I know first moved into their house, the front, cement porch collapsed costing them $1.500 to repair.
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