The Pandemic has caused mortgage rates to linger around the 3% range for a while now after having initially dipped into the high twos in what was a historically low number. Economic stimulus programs intended to prop up the economy during the Covid era are tapering off, unemployment is down, and inflation is on the rise. The combination of these factors are what drive rates up and for the first time in nearly three years, we are looking at an average of 4% for a 30-year FRM. As it stands, this week kicked off at 3.92%, a level not seen since January of 2020 according to the chart below.
The lower rates helped keep homes affordable despite the rising prices. An eighth of a point increase (.125%) is equivalent to $40 additional per month on their mortgage payment or a $10,000 loss in buying power. The name of the game at this point is getting a home before the price continues to increase, as average prices are predicted to rise another 10% by the end of 2022 and before rates continue their ascent. Below you’ll find Shant Banosian of Guaranteed Rate Cost of Waiting Graphic. It shows how a home valued at $500,000 with a 20% down payment will cost monthly at a mortgage rate of 3.0% compared to that same home, 10% higher in cost with a mortgage rate increase to 3.75%- a $352 a month increase on top of needing to put $10,000 more down. Same home! That’s the cost of waiting.
Rising rates with historically low inventory will make buying a home more challenging and costly than it has been, but as the seasonal freeze begins to thaw, hopefully more homes listed with lessen the competition and take some of the pressure off.
