You might be hearing news of rising mortgage rates as we move into the New Year. If you’re looking to purchase a new home in 2017, this recent CNN report from Kathryn Vasel explains why a change in rates shouldn’t cause homebuyers to panic.
“I don’t think anyone welcomes higher interest rates, but it should not be a considerable deterrent to someone who really wants to buy a home,” said Keith Gumbinger, vice president of HSH.com.
Rates under 5% have been the norm for a decade. “We still have quite a ways to go for rates to be even close to average,” noted Len Kiefer, deputy chief economist for Freddie Mac.
In 1996, the average rate was 5.67%, and in 1990 it was 10.13%.
Rising home prices, fueled by strong demand and tight inventory, have pinched buyers in recent years. Lower interest rates helped temper that rise, but as they move higher, borrowing becomes more costly and can reduce a buyer’s budget.
“If rates remain at this level, some marginal buyers could be pushed out of the marketplace,” said Gumbinger. “There could be less demand for properties on the margin, but I don’t think there will be a huge change.”
Kiefer said he expects home prices to continue to rise in 2017 year, but at a slower pace than we saw this year. “The supply is pretty low compared to demand and that will keep pressure on prices and rents.”
The rate increases could be felt more by house hunters in the country’s more expensive markets, like San Francisco and Manhattan.
“Affordability is already difficult in some markets,” said Erin Lantz, vice president of mortgages for Zillow. “Rates can have more of an impact in those areas, but for most of the country, it’s still very affordable, by historical standards”
Read the full article: Why rising mortgage rates are no reason to panic