After several years of record lows in mortgage rates, it was widely expected that the rates would steadily rise in 2018. Just recently, interest rates rose to their highest point in the past four years. This is creating a strong sense of urgency for prospective home buyers and current homeowners who are considering refinancing their mortgage loans.
Currently, we are seeing the higher rates spurring more demand for borrowers. This is especially true in those looking to refinance their home while cashing out equity. The logic here is that rates will continue to go up, so people should want to act fast and get their loans done now before mortgages get more expensive.
Economic Factors Driving Rates Up
The markets have been more volatile of late that can directly affect interest rates for consumer credit. We were all expecting rates to go up this year due to a variety of economic factors. The rates actually stayed lower in 2017 than many experts predicted, but it was clear that the rates couldn’t have stayed as low as they were for much longer. Real estate and mortgage industries are very cyclical in nature and interest rates are not different. Here are the potential reasons we have seen interest rates rise:
Inflation finally showing signs of heating up
Federal Reserve’s Commitment to Reduce its Balance Sheet (as planned)
Europe and Global Yields Increasing
Anticipation of Economic Growth stemming from Tax Cuts (which in turn would create inflation in the future)
However, in recent years past we have seen interest rates hit their hights for the year in the winter time, only to come back down a bit during summer months. However, if I was a betting man, I would not bet on rates coming back down. My take is the best we can hope for is for rates to stay right where they are at.
Here are the most prevalent interest rates as of the latest hikes:
- 30-year fixed: 4.5%
- FHA/VA: 4.0-4.25%
- 15-year fixed: 3.75%
- 5-year ARMs: 3.5% (depending on the lender)
The good news is that rates are still relatively low and mortgages are very affordable. It is a great time to buy or refinance (including a cash-out refinance), and the rising rates only add to the importance of acting sooner rather than later. If you have been on the fence, you shouldn’t wait any longer.
Adding to the urgency is rising home values. This is good for people looking to cash out or refinance, but it is concerning for those looking to buy. Most prognosticators expect the home prices to level out later this year. That is typically a natural reaction to rising interest rates. It’s all part of the cyclical nature of real estate. San Diego County has seen some of the biggest price increases in the country. It’s been an extremely hot seller’s market. At the same time, buyers have been able to take advantage of historically low interest rates. Now, we’re seeing things start to self-correct and mortgages may become less affordable as the year goes on.
Your San Diego Mortgage Experts
If you have questions about buying a home or refinancing your current mortgage loan, call Transparent Mortgage today at (619) 929-0199. We’ll help you make the right mortgage decisions and maximize your homeownership situation. The time is now to buy or refinance, so don’t wait to act!