POST TAGSMortgage News
Blog posted On January 25, 2022
Spring might be starting early for this year’s housing market. Two weeks ago, mortgage application submissions for home purchases surged 8% – the largest weekly jump since September. As mortgage rates reach pandemic-highs, home buyers are eager to get a move on their purchases.
Why are mortgage rates rising?
In December, the Federal Reserve announced its plan to speed up its asset tapering process. Since then, mortgage rates have generally been trending upward. With the Fed concluding its tapering process in March rather than the summer, the benchmark interest rate will likely start rising sooner. Many economists believe that the Fed could raise rates as soon as March, immediately after tapering concludes. Although the benchmark interest rate does not directly set mortgage rates, it does tend to guide their trends.
So right now, “the broader bond market (which dictates interest rates) is in the midst of an adjustment process in response to a shift from the Fed,” writes Matthew Graham of Mortgage News Daily. “Between now and [March], the traders who share this realization [that the Fed will soon lift the benchmark] will be making trades that drive rates gradually higher.”
How are home buyers reacting?
Many home buyers fear that historically-low mortgage rates are on their way out. Therefore, they’re jumping at the chance to lock in rates before they rise more. “We were going to wait [to buy] until the spring, and we decided to push it up because of interest rates,” said Katie Severance, author of “The Brilliant Homebuyer: 101 Tips for Buying a Home in the New Economy.” “The rule of thumb is that for every one-point increase in mortgage rates, your buying power goes down almost 10 percent.”
What to do next
If you’ve been debating when to make a move on your purchase or refinance, now might be the time.
Sources: Bankrate, CNBC, MBA, MBA, Mortgage News Daily