Are rates climbing now?
Homeowners and homebuyers can be heard asking, “What will we do when rates go up?” “Should we have bought or refinanced two months ago?” “Were those mortgage people telling the truth?” Well, guess what? Rates aren’t going up, they are up. So, what do we do now? Do you wait like you have done for the last couple of years? Do you hold firm that rates will go lower if youwait a little longer? My answer is “NO!” Get with your Realtor, get prequalified, and get going. Your new primary or secondary home is out there. Get over the shock of the increase in rates and act before we get hit again.
Rates will be higher in 2017. Lets take a look. If you need a $300,000 mortgage and the rate is 4.125 percent instead 3.625 percent, the difference in payments is only $ 85.80 per month. Is that enough to stop your transaction? Probably not.
We have experienced a sudden spike in rates immediately after the presidential election. The next day, stock market values climbed, the U.S. Treasury yields jumped up, and mortgage interest rates climbed. It was a surprisingly quick reaction.
Many of us remember the mid 1980s, when rates were at 14 percent briefly and then we celebrated as the rates fell to 9 percent. A little over 4 percent on rates for 2017 is quitw a favorable contrast to past decades. If you are in the market for a home, you will also definitely want to consider the adjustable-rate products. The 5-yearARM and the 7-year ARMare currently at 3.25 percent and 3.625 percent, respectively.
Is there any reason to be thankful that rates are up? Consider this: In a rate-rising market, even though a little pinch is felt at first, it usually means that retirement accounts, which are filled with interest-bearing instruments, will also be on the rise. Also, the stock market will increase in value. So let’s not be too concerned.
What should we expect for interest rates as we get into the first and second quarter of 2017? Will they continue to increase? The historic answer is that we will probably see rates level from this initial jump. By that I mean that the 30year fixed will probably stay in the low 4 percent range and the 15-year fixed will stay in the 3.25 percent area — still extremely beneficial rates for homeowners. These rates are for conforming mortgages (Fannie Mae and Freddie Mac) which are less then or equal to $417,000.
Remember, in 2017 the U.S. economy will still be at a low-growth level and we should not expect rates to jump until the economy has shown some real growth, perhaps late in the year.
Jim Gay was a real–estate broker for 20 years and has been a consultant to Fortune 500 companies. He is currently a broker/owner ofThe Mortgage Place Inc. (986-9080) and can be reached at jim@ jimgayhomemortgage.com.