Should you lock yours?
Interest Rates Rise After The Pandemic, Should You Lock In An Interest Rate Before It Rises?
Even for those who tend to stay out of the way of real estate prices and trends, it would be an effort not to be aware of the volatility that last year’s economy brought to the market. housing market. Cities snowballed with rising house prices, while labor and supply shortages complicated construction, maintenance needs and the rest of industry.
The housing boom was truly a perfect storm. The broader lack of control around the world encouraged anxious buyers to secure their dream homes, and work-from-home setups suddenly seemed more suited to more spacious spaces. Not to mention the hustle and bustle of quarantine with everyone in the family at home, it’s no wonder many of us crave a little more space!
For all of these reasons and more, the US real estate market gained more value in 2020 than in any year since 2005. Mortgage rates also fell to all-time lows as the Federal Reserve injected funds into the market in an attempt to maintain stability.
It was a strange time, as many potential buyers were keeping incomes steady (often with the added benefit of a stimulus check), while record interest rates (around 3%) made it more possible to make a major purchase. Couple that with the inability to create new homes due to labor and supply shortages, and you have the housing boom of 2020.
And while it looks like the peak of this pandemonium has passed (for now), there are plenty of people out there who are ready to shop for housing in this post-chaos bliss. For those who fall into this category, we’ll go into detail about the current interest rate situation and the best time to lock in your interest rate. These low interest rate incentives will eventually revert to pre-pandemic rates, and we’re here to help you maximize your opportunities during this unusual time.
So what do interest rates look like now?
It is mid-November 2021 and interest rates are still in the 3% range where they were at the height of the pandemic. We see them going up a bit, but think 3.15-3.20%. For reference, interest rates were at 3.72% in January 2020 … AKA the calm before the storm. Note that these rates are for a 30 year mortgage. 15-year loans will be significantly lower, typically around 2%, as buyers only borrow the money half the time.
Inflation plays a big role in interest rates, and as of October, the annual inflation rate in the United States was at its highest level in 30 years. Sheeesh, that’s high. It is also a reason to believe that interest rates will start to rise again by the end of the year. Another factor in interest rates is the strength of the economy, which has also improved considerably since it recently hit its lowest point in March 2020. People are spending money and working again , which creates a stronger economy and will likely lead to an increase in interest. rates. And let’s put a few more personal factors into play: People feel more confident and comfortable with the state of the world, the health of their families, and their ability to live the lives they once led. All of this contributes to a stronger economy and is part of the reason we should expect to see more “normalized” interest rates in the future.
Should I secure a current interest rate before the trend continues to rise?
When it comes to making your decision to jump on the bandwagon before interest rates rise, there are a few things to keep in mind.
- Just because interest rates are likely to continue to rise doesn’t mean you have to rush your long-term investment and decision to buy a home.
- If you decide that you are ready to seek mortgage lenders for a possible purchase, Refily’s comparison market will help you find the best lender for your situation
- If you are ready to buy a property and you’ve found your winning mortgage, the sooner is probably better than the later if you’re hoping to get a lower interest rate
Once you’re about to accept a mortgage offer, there are usually two ways to select an interest rate: either lock-in or variable rate. “Lock-in” means that the rate will remain constant for the duration of the interim process before the trade closes, as long as the trade is closed before the lockout expires (typically 30-60 days). If the buyer chooses not to lock in initially, there is still a chance for interest rates to fluctuate before the deal is closed. This is the risk incurred by “floating a rate”. With upward trends expected in the near future, locking in a rate will likely be the best decision if you choose to take out a mortgage, especially since it can take some time to officially close a loan. month.
It is possible that rates will drop after you lock in a rate, but given the current economic circumstances, this is unlikely. Mortgage rate freezes will sometimes cost a very small portion of the loan, but it will be well worth the risk of the additional fees if interest rates rise. And finally, if your mortgage rate foreclosure appears to be expiring before the deal closes, you may need to purchase a foreclosure extension. These are all additional costs to consider before making your decisions, and Refily’s The platform can help you understand all of these costs easily so that you can feel confident and informed about your decision.
Refily is a lender comparison marketplace that combines technology to create a robust, data-driven, and mindful platform to ease the process of finding a lender and present buyers with the best possible comparison.
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