Today we are talking about mortgage rates which have been on a steady climb upward. In fact rates have almost doubled since the beginning of the year. Brady Thomas, a loan advisor with LaSalle Mortgage Services breaks it all down for us.
Will mortgage rates continue to go up?
Mortgage rates were around 3% for a 30 year fixed rate mortgage at the beginning of the year. Right now, Brady says rates are around 5%. Everything right now is affected by inflation. Rates are moving up as a hedge against inflation and as long as we see inflation unchecked Brady expects rates will continue to move up.
Are higher mortgage rates affecting people’s buying power?
This is the highest mortgage rates have been since 2008 and it’s affecting how much people can afford to spend on a home. Brady says it feels like the word is out that money is more expensive and buyers are reconsidering how much they can spend on a home.
Are mortgage applications down?
Brady says purchase applications are down 15-20% compared to last year. However, if you compare this year to 2019, Brady says purchase activity is similar to where things were pre-pandemic.
Other loan options
For the last few years Brady says most people have opted for a 30 year fixed rate mortgage. But now that rates are higher, If you want to keep your monthly payment down, Brady says there are two other loan options to consider. One is an adjustable rate mortgage and the other is an interest only loan. Speak to your loan advisor about which option is right for you.
Trends over time
Mortgage rates might seem high now compared to where they were 6 months ago. However, compare current rates to mortgage rate trends over time. Brady says historically over the last 50-60 years, 30 year fixed rates averaged between 7-9%. So, when you look at the big picture rates are still lower compared to where they have been.
Advice for home buyers
Some home buyers might think they are priced out of the market now and want to wait for mortgage rates to go down. That’s one option, says Brady, but there’s no guarantee they will go down anytime soon. Brady says as long as inflation is running high, rates will probably continue to rise. His advice? If you find a home you love and you can see yourself living there for the next 7-10 years then there’s never a bad time to purchase. Brady says people who purchased when rates were higher refinanced once they dropped.
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