The historically low home mortgage rates are coming to an end with the Federal Reserve’s recent interest rate hike and plans for more in the future. But that may not have an immediate effect on home sales in the CSRA – and may end up turning into a positive.
Tiffany Sheppard, the mortgage banker with Atlantic Bay Mortgage Group in Martinez, said rates are already rising from last year’s lows. Some clients who pre-qualified for loans a month or two ago but who were still shopping around may now have to requalify. That has her urging quicker action.
“With new builds, I’m recommending to people, ‘Let’s lock it in now,’” she said.
Shawna Woodward of Re/Max Reinvented Evans said the rising interest rates are spurring people to move a little quicker in the real estate market.
“It’s made a lot of people who were on the fence get a little more aggressive,” she said.
Even a small percentage increase in interest rates can make a big difference over 30 years. The difference in buying a $300,000 home with $20,000 down with a 5 percent interest rate over a 4.5 percent rate could result in about $30,000 extra in interest payments, and increase the monthly mortgage payment by about $85.
But Woodward said the local market may not be affected much in the near future because the demand for homes is significantly higher than the inventory in some locations.
“Until the inventory issue changes, I don’t think it’ll make much of a difference,” she said. “It might make people move even quicker.”
The Fed is planning to continue raising its interest rate incrementally over the next year in an attempt to bring inflation under control so higher mortgage rates are almost assured.
“The environment is still touch and go but I don’t see it going down,” Sheppard said. She has already seen the rates she’s quoting move from below 4 percent to more than 5.
She said that although the refinance boom was in 2021 because of the low rates, there are still reasons to seek refinancing if cash flow is needed.
“It’s still cheaper than credit cards or unsecured loans,” she said.
Woodward said the higher rates could be a boon for a home seller if they have a low-rate loan that can be assumed by the buyer. But overall she doesn’t expect to see a big change in home buying trends in the near future.
“Our community and area are growing so much that I don’t expect a huge noticeable impact,” she said. “The one thing everybody needs is housing. It will always be the biggest investment most people make and the largest thing where your money goes, but it is 99.9 percent of the time an appreciating investment.”
Sheppard recommends home buyers act quickly before rates rise again.
“Get in there and apply, be ready with your credit and down payment, and act fast – not irrationally but if you’re serious, act fast,” she said.
Woodward added that with the ebbs and flows of the real estate market people will eventually adjust their thinking about the new rates.
“Back in 2008 5 percent was considered a great rate,” she said. “In 10 years this probably won’t even matter anymore.”
