In recent months and weeks (at the time of this writing), the fixed mortgage rate has been inching up pretty consistently. There is no doubt, in fact, that across most local property markets, mortgages are increasing, which is something which presents unique problems for buyers. Whenever this happens, the dilemma becomes whether to hold tight for the time being and hope that the trend will reverse and mortgages will come down, or whether to act as quickly as possible as a form of damage limitation.
CityHome Collective, a real estate brokerage out of Salt Lake City, say that while rising mortgage rates may be a phenomenon we have seen before, but how to act as a buyer in reaction to them has never been fixed. Each time it happens, there are many other factors to consider.
How Rising Mortgage Rates Affect Buyers
So, if you are looking to buy a property in the context of rising mortgage rates, it is important to understand more fully how they affect you. Most fundamentally, rising mortgage rates mean that your purchasing power will decrease. When you buy a home, of course, you need not only to consider whether you can afford the asking price but also whether you can afford the mortgage payments going forward. In this sense, rising mortgage rates are pretty consistently a bad thing for buyers, but this is far from all there is to it.
With your purchasing power continually decreasing, the question again arises of whether it’s better to act now or to wait. Current trends would seem to suggest the former course of action, although it should also be noted that rising mortgage rates make those sellers who are hoping to move to a new property (and who are therefore also concerned about rising mortgage rates) more eager to shift their current property sooner rather than later.
So, approaching a property market filled with sellers who are eager to sell could work in your favor, but the question of timing remains.
In the current situation, it does look very much like acting quickly is the best course of action. This will allow you to get the property you want before the rising mortgage payments ultimately deplete your purchasing power to the point where you can no longer afford it. However, also bear in mind that by acting quickly you will be dealing with sellers who are similarly looking to act fast. This can therefore increase your ability to snap up a property quickly at precisely the time when you really need to.
Thus, it is also important to choose your realtor carefully. You want a brokerage that is well abreast of how rising mortgage rates are affecting seller behavior and knows full well which sellers are eager to shift their properties. They should be able to single out the properties that will be easier for you to purchase before mortgage rates increase even further. This only becomes more important when you consider that some sellers may have been put off by rising rates to such an extent that they have become reluctant to sell. These sellers also exist – though in smaller numbers – and so a good brokerage is essential for sifting such buyers out and saving you a lot of wasted time.
Ultimately, we can think of the recent rising mortgage rates as something of a jolt to the whole property system. Yes, they will eventually make purchasing a property more expensive and therefore harder, but they will also energize buyers and sellers alike, leading to a new market dynamism which buyers would be wise to exploit.