Interest Rates Are Rising – What is the Short-Term Outlook?
We are approaching the one-year mark since we all were shut down seemingly out of nowhere. Rates plummeted and have stayed ridiculously low for almost a year now. And while this was great news for people that were buying the home or looking to save money and consolidate debt through refinancing, we all wish this nightmare would be over. Rates actually started to move up on January 5th after the Democrats gained control of the Senate. The reason: mortgage rates trend with the mortgage-backed securities market which is a bond that is bought and sold on Wall Street. Bond investors biggest fear is inflation because that will erode the return on investment faster than anything. Democrats are moving very quickly to pass a $1.9 trillion stimulus package on top of the 900 billion that was just agreed to in January. Bond investors are convinced that this will be inflationary in a big way. When they sense that inflation is going to be problematic, they will sell bonds, which drive’s up rates. At the low point on January 4th, rates bottomed out for the very best borrowers in the mid 2’s. They have gone up as much as a ½% but have recently shown signs of stabilizing. So, with the 30-year interest rates around the high 2’s to low 3’s (depending on your situation) rates are still at some of the lowest points we have ever seen in history. If the economy continues to heal, and COVID-19 cases continue to decline with the new vaccine rollouts, rates will likely continue to inch up going forward. We do not think the rates are going to go up significantly in the short term because the Federal Reserve has tools at its disposal to prevent that from happening. They do not want interest rates going up too quickly because it has the potential to derail the recovery before it even gets off the ground. So, what to do: if you are looking to refinance, now would be an excellent time to consider consolidating debt before rates go up any further. If your interest rate is in the high 3% range or higher, it is worth taking a look because you may have one more shot at securing a historically low rate for the future. If you are in the market for a new home or considering making a move, don’t panic. Rates are still insanely low and likely to stay under 3 ½% this year. Give us a call and we can put a quick loan comparison together for you.
Update on Spring Homebuying Season
If you have a pulse on the home buying market, you are aware of how low the inventory levels are and how competitive it has been. We are hopeful that as we get further into the spring, we will see more homes coming on the market. That being said, you are likely to be in a situation where there will be multiple offers on a home, assuming the home is fairly priced. Therefore, it is crucial that you work to position yourself to have the best chance of having any offer that you submit, accepted. Listing agents and sellers know the difference between a borrower that is just prequalified and somebody that is fully underwritten and Certified. They are not going to take chances on someone that is not willing to do the legwork up front to get a solid approval. We pride ourselves in making sure that you have a better shot of getting your offer accepted than the other folks you are competing against. Learn more about our Certified Homebuyer Program and the Guarantee that we offer sellers at www.perfectpreapproval.com. Feel free to give us a call for a free consultation and learn more about how buy your first home or navigate selling your existing home and buying a new one in this tricky market (maybe you don’t have to sell your existing home first). The other critical factor in your success will be working with a super knowledgeable and connected Realtor…. They are worth their weight in gold in this market.
“If you know you’re going home, the journey is never too hard.” – Angela Wood