Mortgage interest rates have been trending upward all year. So, what’s ahead, and why?
The Federal Reserve Board will be meeting at the end of next month, and right now, the markets are banking on another .25% increase, according to Origination Pro, a publication for mortgage loan officers.
“Again?” Yes, as I type this, I have received an alert that rates are going up midday and to lock now if you’re floating your rate.
“Why?” Because good economic news leads to higher rates.
- The number of new jobs for August was higher than expected.
- More individuals are re-entering the workforce.
- Wages have increased, on average.
- Consumers are spending more money, putting cash into the marketplace.
- Consumer confidence is soaring.
Chairman Jerome H. Powell said in his speech on changing markets and monetary policy:
“Over the course of a long recovery, the U.S. economy has strengthened substantially. The unemployment rate has declined steadily for almost nine years, and at 3.9 percent, is now near a 20-year low… With solid household and business confidence, healthy levels of job creation, rising incomes, and fiscal stimulus arriving, there is good reason to expect that this strong performance will continue.”
Read the full speech here.
Time for Action!
If you have an Adjustable Rate Mortgage (ARM), consider refinancing into a fixed rate, if you plan to keep the house for a substantial amount of time.
If you want to shorten your mortgage term to 20 years or 15 years, do so now before rates go higher.
If you want to buy a home and stop paying rent, don’t procrastinate. Get pre-approved for financing and contact a local real estate agent.
If you are working on your credit, ask your loan officer if you can qualify for an FHA loan now while your credit is improving.
I want to make everyone aware that mortgage interest rates have been and are continuing to rise rapidly. The rate you were quoted last week no longer applies. In fact, the rate you were quoted yesterday no longer applies. Your interest rate is not secure until it is locked.
To lock your rate, ask your loan officer to do so. For a matter this important, make the phone call. Do not rely on an email which can be overlooked or missed.
A rate lock is tied to a specific property address, loan amount, and other terms. There is a “Lock and Shop” program where you can lock in your rate before you have an address; however, that is riskier to the lender, so the interest rate is higher, which pretty much defeats the goal in most cases.
If you want a lower monthly mortgage payment, I strongly suggest you resist the temptation to wait until after the New Year to find a house. Get with your Realtor now and make an offer. Then the minute you have a mutually signed Purchase Agreement, send a copy to your loan officer so that you can lock in your interest rate.
If you know someone who is thinking of buying a home in the near future, please pass on this vital information, because procrastination will result in a higher payment.
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