Mortgage rates have risen significantly amid concerns that the Fed would cut back on its $85 billion a month bond-buying program. Rates on a 30-year fixed mortgage are currently averaging about 4.5%, up from 3.35% in early May. That rate increase has meant an extra $132 a month in payments for a homebuyer with a $200,000 30-year loan.
But now that the Fed has said it will continue to purchase the bonds, rates will likely retrace some of those gains, said Keith Gumbinger of mortgage information provider HSH.com.
“Now, we do have some space for rates to fall,” he said. “I don’t expect a plummet, just a drop of 0.1 percentage points or so over the next week or two.”
The day after the Fed’s announcement, Freddie Mac reported that rates on 30-year fixed-rate loans fell from 4.57% to 4.5% over the past week. Freddie Mac’s chief economist, Frank Nothaft, said rates were reacting to the same economic trends that influenced the Fed’s decision.
Among them: slowing growth in retail sales and industrial production and the lowest reading in consumer sentiment since April. He also noted tighter financial conditions, including the sharp increase in mortgage rates in recent months.
Should the economy gain more momentum, however, fears that the Fed will taper off its bond purchases will most certainly resurface and rates will move higher again, he said.
Nothaft expects rates to hit about 5% by mid-2014. That’s an increase of less than $24 a month for every $100,000 borrowed — enough to weed out borrowers who are struggling to afford homes but not enough to impact overall demand.
Despite recent increases, rates are still low by historical standards. During the housing boom years, they typically ranged between 6% and 7%.
And higher rates should prompt some banks to ease up on their lending standards, helping more people to buy homes, said Jed Kolko, chief economist for Trulia.
“Rates will be slightly higher next year but not enough to derail the housing market recovery,” he said.
So for those who have been waiting for the right time to buy, now is looking more and more like the time to get back into the market before these rates continue to rise.
"My name is Emilio. When I was buying my property, I hired Mr William J Reinhardt Jr as my Real Estate Attorney, it was one of the best decision I ever made because he did everything in his power to make sure my purchase was successful. For example, The utilities bills left over by the person who owned the property before me. I said thank you to Bill for not allow me to pay these costly bills." - 5.0 stars | Posted by Emilio Bien Aime | October 1, 2019
"Mr. William Reinhardt Jr. is my lawyer for many years. My family and I bought and sold properties with his help and were very satisfied. I recommend Mr. Reinhardt to anyone. I give him a 5-star review." - 5.0 stars | Posted by Diana | September 19, 2019
"My husband and I loved working with William. He was very professional, efficient and went above and beyond to help us. We would HIGHLY recommend." - 5.0 stars | Posted by Leeann | September 13, 2019