When buying or selling a house, one of the most important factors is mortgage interest rates. Rising interest rates add to the overall cost of a home while decreasing rates have the opposite effect.
People looking to purchase homes focus on current rates and locking in the best terms possible. However, those looking to sell their homes must also consider mortgage interest rates and if they will need to adjust their sale price lower to account for buyers with less buying power.
It should be no surprise that as a leading home buyer in Washington DC, Maryland, Virginia, and Pennsylvania that we’re constantly asked which direction interest rates are headed.
This is why we’re going to give you our expert opinion and the facts that back up that position.
Mortgage rates have started a slow but steady rise from historic lows.
To understand what will likely happen in the next few months, let’s first take a quick look at what has already happened with rates.
This past year, we’ve seen some of the lowest mortgage rates in history. The first week of January, rates hit 2.65%, which is the lowest rate ever recorded by Freddie Mac in the 50 years they’ve been tracking the data.
Over the last few months, rates haven’t strayed far from that historic low. This has been an incredible opportunity for the homebuyers and homeowners who have been able to purchase a new home or refinance their existing home during this time.
These low rates were caused mainly by the pandemic and federal support of the economy.
A little background: The Federal Reserve System (or the Fed) is the central bank of the United States. In March 2020, the Fed started buying up massive amounts of assets (U.S. Treasuries and mortgage-backed securities, or MBS) in an effort to prevent a financial crisis. Alongside the pandemic, this caused mortgage rates to plummet. Rates dipped below 3% for the first time in July 2020.
In late September, the Fed made an announcement that they were preparing to gradually taper off their economic support. They aren’t pulling their support suddenly, but rather gradually reducing how quickly they purchase Treasuries and MBS.
Since the tentative announcement of tapering, mortgage rates have begun to creep up.
Following the announcement, rates jumped to 3.01% after being at 2.88% the week before.
“Mortgage rates rose across all loan types this week as the 10-year U.S. Treasury yield reached its highest point since June,” said Sam Khater, Freddie Mac’s Chief Economist, in their news release on the topic. “Many factors led to this increase, including the Federal Reserve communicating that it will taper its support of the capital markets, the broadening of inflation and emerging energy supply shortages which compound other labor and materials shortages.”
Knowing all this, what can we expect in the coming months?
Rates will continue to gradually rise.
Khater continued, “We expect mortgage rates to continue to rise modestly which will likely have an impact on home prices, causing them to moderate slightly after increasing over the last year.”
The Mortgage Bankers Association (or MBA) agrees that the change will not be sudden. According to MBA’s September 21 forecast, rates probably won’t reach 4% until the end of 2022. In the related commentary, MBA notes that “the pending taper and change to the monetary policy outlook will likely contribute to a modest increase in mortgage rates over the medium term.”
So, there you have it: for the foreseeable future, rates have nowhere to go but up. While we believe the experts are being conservative about the move up, the increase is coming.
What does this mean for homeowners looking to sell their homes?
If you’ve been waiting on moving into your dream home, now is the time. Rising interest rates mean less purchasing power for potential buyers and a lower sale price of your home.
If your house needs repairs, a renovation, or other costly and timely work before it can go on the market, MarketPro Homebuyers is here to help. Our experienced, professional team makes the process straightforward with a cash offer, no repairs, no inspection, no realtor fees, and a fast closing!
We have helped thousands of people sell their homes in this manner, earning a reputation as one of the top real estate companies in the DMV. Don’t wait – get an instant quote today!