Mortgage interest rates hit 5% for the first ime in a decade
After falling to historic lows last year, mortgage rates are rising sharply. On April 5, they hit their highest point in more than a decade with the average interest rate for a 30 year fixed rate mortgage topping 5%, up from 3% just a year ago.
That’s Great News
Housing industry experts argue it’s a good thing for the red hot US housing market. After nearly two years of an exceptionally expensive, exceptionally fast moving market, analysts say higher mortgage rates are just what’s needed to cool things down. These higher rates are expected to slow demand and temper home prices.
How mortgage rates impact the housing market
Mortgage rates tend to change alongside interest rates set by the Federal Reserve. The Federal Reserve has indicated it will raise rates a total of seven times this year to 1.9%. The higher mortgage interest rates are expected to slow housing price growth.
While home prices may not fall much, even slowing price hikes would be a relief for buyers. Sellers are less likely to ask for exorbitant prices if prospective buyers are facing higher monthly mortgage payments.
Higher mortgage rates mean a more balanced housing market
Increased mortgage rates will force some people, especially first time homebuyers who have no existing equity, to pull out of the housing market entirely for a while. Many will remain as renters. On the whole, higher rates will restore balance to an unsustainable housing market with thin inventory and soaring prices.
Leave a Reply