We’ve already seen changes in interest rates in the wake of the election, and we could see more soon. It’s important to know how these rate changes affect home buyers and sellers.
The election is over and 2017 will be here before you know it, so today, I wanted to discuss interest rates as we head toward the new year. For an expert opinion, I’ve brought in my preferred lender, John Ragland from Supreme Lending, to talk about it.
So what’s happening with the results of the election?
As John says, the results were a bit shocking from the perspective of the market; the market was expecting Hillary Clinton to win. He added that many expected interest rates to move even lower with the surprise Trump win due to investors getting spooked by the change, which would in turn cause them to buy mortgage bonds and lower interest rates even further. This didn’t happen, though, and investors ended up seeing that as positive.
Many investors moved money out of the stock market because futures went down. Investors parked their money in other places. This caused interest rates to get higher by a quarter of a percent, as John points out. Since this could be a knee-jerk reaction, John says, we need to wait and see how the market digests. He doesn’t expect rates to go back down, but we’ll need to keep an eye on whether the trend of rates going up will continue.
Additionally, it’s important to understand how rates impact affordability for buyers and sellers alike. When we talk about shifting rates, a change of 1% equals a 10% change in housing cost. That means if you’re pre-approved for a $200,000 home and rates went up by 1%, you’ll now be approved for just $180,000.
Rate changes have a huge effect on both buyers are sellers.
In short, rate changes affect what buyers can afford, as well as what sellers can get for their homes. As John points out, rates going from 3.75% to 4.25% is not that big of a jump, and it’s very possible that they will do that. In fact, just a year ago, rates hovered around 4.5%. It’s very important for buyers to understand that we don’t know where rates will be next year. Depending on what the Fed decides, rates could be at 4% or higher by next year. Rates have a big impact on your mortgage payment.
It’s much easier to purchase now while rates are low because the difference over 30 years is huge.
If you have any mortgage questions for John, you can reach him at (678) 495-2800.