Mortgage Monday with Matthew: Election, Economy & Escalating Interest Rates

The number one question I’m getting these days is what is going on with interest rates?  To say for certain would require a crystal ball, but I can provide some information about how the election and changes in the economy could alter their trajectory.

Historically low interest rates lead to an influx of refinances and purchases in 2016.  People were cashing in on refi savings and enjoying their increased buying power.  Then, immediately after the presidential election on November 9th, interest rates took a sharp turn for the worse.  Yields on the 10-year treasury experienced their largest two-week increase since November 2001.  These changes were driven by rising inflation expectations and the market’s near-certainty that the Federal Reserve will raise interest rates in December.

With news of rising rates, it’s easy to forget that interest rates are still at historical lows and your purchasing power is greater now than at nearly any time in the last 45 years.  Even with the increases we have already seen, interest rates on a national level are basically the same as they were last year at this time.  And remember that during the boom, rates were in the 6’s.  However, experts are indicating that this latest rise might be a new floor, as opposed to a reactionary spike, as many people were hoping.

So what does all this mean?  Regarding real estate, it’s probably best to plan for slightly rising rates in the short term.  The expected movement in interest rates shouldn’t price buyers out of the market, but rather marginally increase their proposed monthly payments.  For sellers, be aware that steadily increasing interest rates may lead to a reduction in appreciation rates and home prices could slow.  Whether you are looking to buy or sell, it is critical to understand what is happening in the market to put yourself in the best possible situation.

 

Matthew Goldberg | Loan Officer | Primary Residential Mortgage Inc. 

P: 480-787-2233 | mgoldberg@primeres.com | NMLS # 1342195 | AZ LO-0930826

9280 S Kyrene Rd #134 |Tempe, Arizona 85284 | NMLS # 3094 | MB-0902614

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