The cost to finance a home just became more expensive again this week. Mortgage rates hit 7.49% this week, the highest level since 2001. Last week, a 30-year, fixed-rate mortgage averaged 7.31%. For perspective, a year ago, it was 6.66%.This is bad news for home buyers, who will now have to pay more for their mortgages. Of course, with fewer buyers in the market, this will also present some challenges for home sellers as well.
Why are mortgage rates rising?
There are a few reasons why mortgage rates are rising. One reason is that the Federal Reserve (Fed) is raising interest rates in an effort to combat inflation. When the Fed raises interest rates, it makes it more expensive to borrow money, which includes mortgages.
Another reason why mortgage rates are rising is that the bond market is selling off. Bonds are essentially loans that investors make to the government or companies. When investors sell bonds, it drives up bond yields, which are the interest rates that bonds pay. Mortgage rates are typically tied to bond yields, so when bond yields rise, mortgage rates tend to follow suit.
The high mortgage rates are a major setback for the housing market. Home sales have already been slowing down in recent months, and the higher rates are likely to further dampen demand. This could lead to lower home prices in the future.
If you are thinking about buying a home, it is important to factor in the higher mortgage rates when making your decision. You may need to save for a larger down payment or qualify for a smaller loan amount. It is also important to shop around for the best mortgage rate possible. Here are some helpful tips for buying a home with a mortgage in this environment:
- Get pre-approved for a mortgage before you start shopping for a home. This will give you an idea of how much you can afford to borrow and what your monthly payments will be.
- Shop around for the best mortgage rate. Compare rates from different lenders to find the best deal.
- Consider a shorter-term mortgage. Shorter-term mortgages typically have lower interest rates than longer-term mortgages.
- Make a larger down payment. A larger down payment will reduce the amount of money you need to borrow and your monthly payments.
- Be prepared to negotiate. In a high-interest-rate environment, sellers may be more willing to negotiate on price.
Are you looking to buy or sell real estate in South Florida? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, don’t forget to download the free Florida Home Search app for your smartphone or tablet.