If you’ve been following this blog or other financial news sources, you will know that mortgage rates have been steadily on the rise throughout 2018. As of October, the average interest rates have officially moved back over the 5% threshold. This is the first time since 2011 that we’ve seen this number.
Why Are the Rates Rising?
Due to various economic factors, the rates have been increasing at a pretty steady pace. One of the big reasons for this latest jump, however, was mixed data related to the job market. The annual pace of wage growth has now held at 2.8% or higher for four straight months and unemployment rates continue to go down. This means wages have been increasing at a very good rate. This puts more pressure on inflation, which thus influences the mortgage loan market in terms of prevailing interest rates.
There are other economic factors involved in this continued rate growth. In general, a lot of economic data is trending upward, adding more causes for overall inflation. Ultimately, higher inflation will almost always lead to higher mortgage rates. The Federal Reserve has also recently raised its benchmark rate, which greatly influences prevailing mortgage rates. The yield on the 10-year Treasury has climbed above 3%, which is another important threshold that affects mortgage interest rates.
Rising Home Prices and Interest Rates
When you combine rising interest rates with continually increasing home prices (especially here in San Diego) largely due to low housing inventory, it can seem intimidating. Home buyers are feeling a stronger sense of urgency than ever to lock in the best possible rates before they rise again.
However, understanding rising home prices and mortgage rates is also a matter of perspective. Inflation and job market growth are two huge reasons why these numbers keep going up. People, on average, are earning more and thus able to afford more when it comes to their mortgages. It’s all relative. If inflation wasn’t increasing at such a high pace or the job market was struggling, we wouldn’t see home prices or mortgage rates rising so rapidly. Instead, we are in a situation where almost everything in the economy is on the rise and that means higher mortgage interest rates.
Today’s Most Prevalent Mortgage Rates:
- 30-Year Fixed – 5.0-5.125%
- FHA/VA – 4.5- 4.75%
- 15-Year Fixed – 4.5%
- 5-Year ARMs – 4.25-4.75% (depending on the lender)
What Does This Mean for Home Buyers?
It’s hard to say if these upward trends will continue with home prices and mortgage rates, but all signs point to continued growth for the foreseeable future. If you are in a position to buy or refinance now, it’s time to get off the fence and take action.
Transparent Mortgage is here to answer any questions you have about mortgage loans and to help you get started toward pre-approval for your home loan. Call us today at (619) 929-0199.