Mortgage rates have been rising for the past few weeks and this would mean that homeowners cannot benefit from their refinance.
Renters are also encourage to purchase a home due to low rates and because they are afraid that maybe every good-condition home would be bought already.
From the previous week, refinances have dropped to 12%, while the mortgage applications in buying a home increased by 3% reaching 14% way back last year.
According to Mike Fratantoni of the MBA, “Rates rose in response to stronger economic data and an increasing chance that the Fed may soon begin to taper their asset purchases.”
Due to the crash of the housing, billions of dollars have been poured by the Federal Reserve in the market. As a result, mortgage rates are going down to the lowest record. However, Ben Bernanke (Fed Chairman) said that these infusions of the monthly mortgage market might end very soon.
Because of this, the 30-year fixed conventional mortgage rate has been pushed by about 3.9% (the highest level in a year) which is very close to a dangerous 4% barrier. Home prices, then jump very high and faster than they expected.
Craig Strent, CEO of Maryland-based Apex Home Loans, then said “It’s amazing to see the frenzied pick-up in home buying, as renters get nervous that both home prices and rates will rise quickly. They are trying to catch the beginning of the curve here.”
However, Dan Green (a loan officer from Waterstone Mortgage, Cincinnati) said that he refinance clients are hit the strongest, especially the ones who need lower-cost FHA loans. They are more indifferent to the current situation. “Among the Main Street set, there is little awareness of this month’s change in mortgage rates, let alone the changes of this week. There’s been very little panic among rate-shopping households. There’s acceptable, almost, a ‘low rates couldn’t last forever’-like attitude.”
According to the previous survey of the S&P/Case-Shiller, prices of homes have risen to 10% in March. This is very critical since every 1% point increase in the mortgage rate would reduce the average home buyer’s maximum purchase by an absolutely 11%, said Green. Rising rates could not come at a worse time for the housing recovery.
Potential home buyers would be stricken due to these rising rates, just as they are starting to leak into the market. During April, they made up a low percentage (29% to be exact) and according to the National Association of Realtors, this was the lowest level in two years. Historically, they usually make up about 40% percent of the market.
The 30-year fixed mortgage hit a record low rate of 3.47 percent in December of last year. Even though it is still well below historical norms, this small rise is already taking its toll.
David Fogg, a real estate agent in Burbank, California had concluded – “In my world, it’s clearly slowing the market and pricing. Right now I have properties that are well-priced yet sitting on the market unsold. Should rates continue to rise, values will likely soften.”
Veronica Barfield is active in reading manuscripts that deal with real estate financing. People might think that she is a broad-minded woman with interest on highly sophisticated scripts of laws, but she is indeed a nature enthusiast, a passionate woman who would instead go for a nature hopping than grandeur social gatherings.