In the mortgage business, loan officers constantly interact with their clients, especially as it relates to interest rates. The rate on a mortgage loan just may be the single most important aspect of financing real estate. After all, the rate directly affects the monthly payment. When you call to get updated rate information, I can quote the latest mortgage rates but it’s very possible rates may soon be on the rise.
Higher monthly payments impact affordability and lowers the amount someone can qualify for. If you’re thinking of buying a home or maybe even have a house under contract, unless your rate is locked in, it can be a dangerous proposition to “float” an interest rate. Or, you’ve decided it’s time to refinance but you’re waiting for just another 0.125 percent before you make a move. If it’s a good idea to refinance now, either to get a lower rate, switch terms or combine a first and a second, there’s no reason to wait, especially where rates are today.
The fact is that rates have steadily fallen over the past several weeks and are now near three year lows. The other fact is that rates can’t really fall much further. You’re not going to see a rate hit 1.00 percent for example. If we did see anything close to that, that would be an indication our economy is in some serious trouble. But we’re not seeing any such serious trouble. The unemployment rate is still very low, a record number of people are working and there are more available jobs than there are people to fill them.
I understand there are going to be pockets where unemployment isn’t near the national number but generally speaking, our markets are reflecting most other major metropolitan areas in the country. Wages are up which means employers are having to compete for the very same pool of workers and paying them more is one way to do it. People with more money in their pockets are more likely to spend that money on goods and services. That spreads the wealth around.
While rates might squeeze out another 0.125 percent, odds favor the other direction. There is more potential for rate increases compared to a similar drop for rates to fall. Fence-sitters might very well be thinking of getting off that fence, locking in a rate and moving on. I’ve seen too many people try to get just one more move downward only to discover that rates have moved higher.
And the way mortgage rates are, they’re a bit skittish and will jump higher much more quickly than falling lower. Consumers can get caught up reading economic data every day, looking for some indication the economy is headed for a mini-recession, causing rates to fall. But that’s not happening. In fact, it’s just the opposite.
There are some global concerns from Brexit to China which creates some ripples but so far, the U.S. economy has reacted well. In fact, consumers will purchase more local goods to replace imports from other countries. Our exports are on the rise as well. All of these factors tell me that higher rates in the future is more likely than anything else. If you’re on the fence, give me a call and let’s talk further. It might be time to lock in your rate and move on.