Here’s what buyers and sellers need to know about rising rates.

For the first time since April of 2019, interest rates have surpassed 4%, sitting at around 4.56% for the average 30-year fixed-rate mortgage. What’s causing this rate increase? What impact will it have on the market? Today I’ll answer those questions and discuss some key points related to mortgages.

First, the Federal Reserve said that they’re going to stop their mortgage buyback program, meaning that they’re reducing the amount of money they’re putting into mortgage-backed securities. The Fed has also indicated that they are going to raise interest rates this year as they try to fight inflation. As I’m sure you’ve noticed, the cost of housing (along with everything else) has gone up. The bond market has reacted to this, and the Treasury yields have changed due to the news. All that, combined with the international conflict we’re experiencing, has resulted in rates climbing to the mid to high fours.

So what does this all mean for you? For one, it’ll be more expensive to get a mortgage than it was just a couple of months ago. Some buyers who were, for example, approved for $400,000 may now only be pre-approved for around $300,000. Climbing interest rates result in reduced buying power for those in the market to purchase a home.

“If inventory stays low, buyers’ home affordability will be affected.”

However, the overarching challenge that we’re faced with is the fact that there just isn’t enough inventory in the market right now for the demand we’re seeing. Recently, 12 listings came on the market, and every single one of them received multiple offers. The open houses were packed!

If inventory stays low, buyers’ home affordability will be affected. However, home prices are climbing, so if you’re thinking of selling your home, now is a great time. Rising prices and low inventory mean you’ll be able to sell your home for top dollar with very little competition from other sellers.

If you’re a buyer, check with your lender to see how much you can afford with the rate changes and ask yourself if now is the right time to make a move. Interest rates are predicted to increase this year, so chances are you won’t be able to afford as much home as the year continues.

We’ll keep an eye on interest rates as we move through 2022 and track how they impact the market so that you can stay abreast with the latest developments. If you have any questions about the market or buying and selling a home, don’t hesitate to give us a call or send us an email. We’d love to hear from you.