As the holidays approach, (only to end up shocking us with their fast arrival), home buyers, loan officers, and real estate agents continue to work through their home buying processes.
But when the Fed changes things up, homeowners may face increased rates, affecting both the borrowing costs and the price tags on homes across the nation. But the looming increase doesn’t necessarily mean people need to expedite buying or selling a house.
The most common loan that people generally apply for is a 30-year mortgage with an average interest rate of 3.9%. So, if a home buyer borrowed $200,000 at that rate, their monthly payment would be approximately $944.
Money articles found in Time magazine, often address the mortgage industry. Time states that, “…[low] rates have helped the housing market in other ways. After all, the less you pay to borrow, the more you can afford to spend, so cheap money has enabled home prices…to climb at a steady pace… the Federal Reserve is likely to continue raising rates as long as the economy improves. So, mortgage rates may be set to rise a lot further. But that process is likely to take years.”
Time states that in the event the Fed increases the interest rates by even a relatively small percentage, it doesn’t necessarily mean that there will be a hike in mortgage rate amounts for borrowers as well.
The interest rates that borrowers pay for 30-year loans typically reflect longer-term rates, usually the rate of the 10-year Treasury bond, since around a decade (give or take) reflects how long homeowners hold onto their mortgages.
Still, short-term interest rates influence the market for 10-year Treasury bonds, but they are far from the only factor. Another significant factor is that of investors’ appetites for risky assets. Basically, Time says that “…market forces can push mortgage rates around regardless of what the Fed does…30-year mortgage rates have floated as high as high as 4.43% and as low as 3.67% without the Fed moving short-term interest rates in either direction.”