When the time comes for you to buy a home, the current mortgage rates can greatly affect your options. They may even be the one obstacle that prevents or encourages you to buy a home. Find out how mortgage rates can affect you, and what the current industry trends show.
What are mortgage rates?
Although mortgage rates are easy to understand, many people don’t comprehend what they are or how they affect them. Simply put, a mortgage rate is the rate of interest a given lender applies to a mortgage. The mortgage is a loan that you take out to finance the purchase of a home.
Over time, the average mortgage rate fluctuates. There are many factors that can contribute to this fluctuation, but it is impossible to know for sure what the future holds for these interest rates. However, one thing is for sure. The mortgage rate matters. When the rate is higher, you end up paying more in interest fees. And when the rate is lower, you can save money.
It all has an impact on buying a new home. If you’re like most people in the market for a home, you need a mortgage to pay for it. If you mortgage rates are high, your regular mortgage payments will be high. Before you make the decision to buy a home, you need to consider how much you can afford to pay on your mortgage payments. Those high rates could mean that you need to buy a less expensive home.
On the other hand, you might look at homes when you can get a low mortgage rate. If this is the case, you may be able to afford a more expensive home than you think. A lower rate means more reasonable payments.
The Current Trends
Recently, mortgage rates in the US stalled. Previously, those rates had been increasing. But the slowing housing market brought an end to that trend. To make up for the lesser demand for homes, mortgage rates are no longer on the rise.
You don’t need to take our word for it. In a period of one week, the 30-year fixed-rate average stayed at 3.83%. Although that rate is higher than last year (it was 3.42% at the same time last year), it shows that the rate is no longer rising. The same is true of the 15-year fixed-rate average, which was steady at 3.13%. That rate was up from 2.72% last year.
While those values flatlined, the five-year adjustable rate average did increase. In one week, it rose from 3.17% to 3.20%. Last year, it was 2.81%.
If you are looking to buy a home, now might be the right time to do so. Home prices are still increasing, and experts expect the housing market to continue to slow. It’s possible that mortgage rates will continue to increase soon. You can take advantage of the temporary stall in rates now. However, waiting could mean that the rates start increasing again.
Contributing factors to the trend
In August, the housing market slowed in the US. Pending home sales dropped by 2.6%. Similarly, existing home sales dropped by 1.7%. New home sales also dropped by 1.7%. In the past months, pending and existing sales of homes dropped four of the last five months.
Another reason for the steady rate may be the high price of homes. Despite the slow market, home prices continue to rise. In July, the Standard & Poor’s/Case-Shiller index rose by 5.9%.
Don’t let the steady rate fool you. Most experts don’t expect the mortgage rate trend to continue for much longer. In fact, many of them expect rates to increase in December. Low inflation and comments made by the Federal Reserve Chair make it likely that rates will increase soon.
You can’t rely on mortgage rates to remain low for an extended period. However, you might be able to count on them staying the same for a week or two. In a weekly trend index, Bankrate.com revealed that a majority of experts expect home loan rates to fall this week. One-third of them expect them to rise, and one-quarter expect them to stay the same. With so much disagreement among the experts, it’s difficult to know what will happen in the short-term.
The long-term picture is a little more clear. The federal government does plan to hike up mortgage rates this year. Although there are no definite plans for the increase yet, experts believe it will occur before the end of the year. They believe that an increase will occur at the last meeting of the year in December.
Is now the time to buy?
You can never be certain what will happen with the rates of home loans. However, it does seem as if the rates will increase. When they increase is a question that may be difficult to answer. But with rates steady for now, you can get an affordable mortgage rate. Check out the available properties and find out if the time is right for you to buy.