Those considering buying a home this year have likely noticed that mortgage rates are on the rise. Much of these increases are primarily due to what the Federal Reserve is doing with its $85-billion-a-month stimulus. So how is this impacting mortgage rates?
The stimulus is currently in place to help keep the economy afloat. As a result, mortgage rates have remained near record lows for quite some time. However, once the economy improves enough to where it doesn’t need the extra help from the Fed, rates are likely to increase as a result of the reduction in the stimulus.
Earlier this year, Federal Reserve Chairman Ben Bernanke said the central bank has made plans to begin tapering the stimulus sometime this year. Since the announcement, interest rates, in general, have been rising. Just by saying that they will likely begin reducing the stimulus caused mortgage rates to increase, so once they actually start tapering, rates are expected to only go up. So what does this mean for those looking for a residential mortgage?
What it means is that now might be a better time to buy a home, rather than wait and risk locking down a higher mortgage rate. It will almost certainly be more expensive to buy six months, a year or even two years from now.
One aspect of the housing market that has been improving is the rise in inventory. Home sales are up and so are prices. However, experts note that inventory levels are still below normal and inventory is expected to be limited throughout the remainder of the year.
As competition is still expected to be high by year’s end, homebuyers should look to obtain the low mortgage rates while they still are available.
Sheri Aguilar is the president of the Lodi Association of Realtors and can be reached at Sheri@YourLocalAOR.com