For most of 2022, we’ve experienced an increase in mortgage interest rates. Just over the last week, we’ve seen the average 30-year fixed mortgage rate increase by .46 percent and the average 15-year mortgage increase by .25 percent. The increase in rates has come from a combination of many economic factors, including the decade-high level of inflation, continued changes in oil prices, and high demand for vehicles. Essentially, as the Federal Reserve increases its rates to try to minimize the negative impact of these factors, lenders are forced to follow suit as their own costs are going up, and need to increase the mortgage rates they offer consumers.
What does this mean for homebuyers?
Due to the increase in mortgage rates, if a homebuyer is taking out a new loan, this will mean a rise in the price of homeownership and negatively impact affordability for millions of prospective homebuyers. Inevitably, an increase in will lead to an increase in monthly payments on the loan. On the other hand, the increase in rates has led to a cool-down of sales prices for homes and slowly allowing the supply of homes for sale to creep back up. So, there is some sliver of positive news for homebuyers, especially in housing markets that are first-time homebuyer friendly.
What does this mean for homeowners?
With the large increase in mortgage rates this year, it likely means that refinancing – the process of getting a new loan on your current property- your current mortgage for a lower rate will be more expensive. So, unless you are in a position to save about 1% or more on your current mortgage rate (with some considerations for closing costs aside) It may be a good idea to wait until mortgage rates begin to come down.
What can homebuyers do now that mortgage rates are rising?
Although rising mortgage rates isn’t the most positive news, there are some things you can do to put yourself in the best position during your home-buying process:
- Take the time to shop around for the best mortgage
- Focus on finding a home that is right for you
- Wait to buy a home until you’re in the correct financial position
What can homeowners do now that mortgage rates are rising?
While we suggest waiting to refinance in this current rising rate environment in order to save on monthly payments with a lower mortgage rate, you may still reap short-term monthly savings by extending your mortgage term, or tap into the equity that you’ve built in your home! Want to read more? Check out: