Monday, July 29, 2013

Mortgage Rates on the Rise

Since the housing crash, mortgage rates have been artificially low and were due to regress.  While many mortgage experts predicted that mortgage rates would increase in 2013, the recent rapid increase in mortgage rates has been quite shocking.  In a three-week period in June, rates increased a full percentage from 3.625% to 4.625% on a 30-year mortgage term.  Although rates began to stabilize in July, many homebuyers fear that interest rates may continue to rise.

The recent rate increase has led to a reduction in the number of refinance applications, however it has not impacted purchase applications or new home sales similarly.  Although rates are higher now than they were in early June, rates are still quite low when we consider historic standards.  With the possibility of interest rates continuing to rise, it may be a good time for interested homebuyers to consider purchasing now.   

For pre-qualified applicants who are searching for a new home, I suggest that you speak with your Loan Officer to determine whether your approved loan amount has decreased.  You should be aware that if you are looking to purchase a house at the top end of your budget and at your highest approved loan amount, the increase in interest rates will decrease the highest loan amount that you can qualify for.  It will also increase your monthly mortgage payment.  For example, based on a $200,000 loan and a 30 year term, a one percent interest increase would raise a mortgage payment by $116 per month.  Higher rates may not be ideal, however Ocean Communities Federal Credit Union has programs available that will allow buyers to purchase a home with little or no money down.  Our CU Realty program also offers homebuyers a rebate that can be used to reduce their closing costs.

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