Will investors be swayed by rising mortgage rates?
There is a sentiment that rising mortgage rates could stall some home buyers who were already under financial constraints.
At the close of November, the 30-year fixed-rate mortgage averaged its highest level in more than a year with rates increasing from 3.5 percent to 4.125 percent in less than a week, CNBC reports.
“It’s kind of sad, because you’re helping out a first-time buyer who is in need of these low rates and doesn’t have the personal liquidity to offset if the rates rise,” one lender in New York told CNBC. He says that he has two clients are struggling with the higher rates. “One is on the bubble, but one is almost a dead deal.”
Should I be concerned about rising mortgage rates?
It is important to remember that mortgage rates remain historically low. While the higher rates may stall some buyers, there is still general optimism that rising interest rates will not affect home sales. The greater concern should be the lender’s strict debt-to-income ratios.
“I tell people, interest rates are 80 percent psychological and 20 percent math,” loan officer Jason Anker, vice president at Salem Five Bank in Waltham, Mass., told CNBC. “I do the math for them and their next reaction is, ‘Oh that’s all?’ Forty dollars a month, $75 a month. They initially think it’s going to be a lot more painful than that. … My advice to clients right now is to be extremely defensive.”
While buyers cannot lock in a mortgage rate until they have a signed contract on the sale of a home, there is plenty of indication that mortgage rates will edge higher in the coming weeks. Why not catch the rates before the rise higher? The Federal Reserve is expected to raise its lending rate in December.