As a lot of the articles here have gone into lately, we have been discussing rising mortgage rates a lot and how this can have a negative impact on the market, and how you can make decisions in order to combat these rising rates. Now to take the other side of the argument, we are going to look at reasons for Rising Interest Rates and the impact on the housing and mortgage markets.
Now when most people talk about rising interest rates, their first assumption is always to assume this is bad for everyone and no good can be had from it. Here we are going to look into 4 reasons why rising interest rates just might be good for people. It might shed some light on a topic that most feel is a dark cloud looming overhead. You may be surprised with some of the reasons that we are going into and how we can spin a negative into a positive and prepare you for the future.
If there is a positive that can come from rising interest and mortgage rates, it is the fact that they might be more willing to make a deal with you considering applications are slowing down as well as purchases and refinances. If there is a noticeable way to see lending institutions be flexible in their lender overlays or their additional requirements above program guidelines, it is by affecting their profits.
With the downturn in applications and loan closings, mortgage companies might be open to allowing for more loans to get approval and close in a time when loans are slowing down. Another item you might see from lenders is their offer to keep your rates low by eating into their own profits.
Yes, they may be reducing their profits, but if they keep their volume up they should be fine when navigating a time when loans are slowing down. This can be a definite positive for those borrowers who have great credit and more than adequate down payments. Lenders will know that those borrowers can go anywhere, so it is in the borrower’s best interest to force the lender’s hands for the best rates.
It is a little-known fact of FHA, VA, and USDA loans that these mortgages are some of the few loans that are assumable. What this means is if you are selling your home and you have one of the government-insured mortgages, the prospective borrowers can take over your existing mortgage.
Assuming a mortgage only holds true if they qualify for the terms of the loan. What this means is only people who can qualify for a VA loan are able to get a VA Loan as you are not going to see people who aren’t military veterans get approved to assume this mortgage. If mortgage rates increase over 5% and you are sitting on a mortgage that is assumable and in the 3’d or 4’s, you will find yourself with a very desirable mortgage. You will have a definite position of power as a seller in this transaction.
Rising mortgage rates are causing homebuyers and homeowners to panic and act on buying and/or refinancing a home sooner than later before rates keep on increasing. If you are in a negotiation to purchase a home and the seller sees that the mortgage rates are on the rise, they should understand that any potential buyers could at any moment get cold feet. Homebuyers can pull out of the ongoing negotiation.
If you are a seller caught in a transaction where it is not a true seller’s market, then you need to be aware of the surrounding market conditions. You may decide to speed along the process by accepting an offer sooner than later. You may think you are not getting the best deal possible, but making a deal is a lot better than holding.
Seeing potential borrowers walk away as they get scared off by rising mortgage rates is no seller wants to experience. If you are a potential buyer of a home during this market, you can use this philosophy to your advantage. Make sure you bring up that by not taking your offer or countering it to make a sale, there is a risk of losing the deal altogether. You do not want eing stuck with a mortgage going forward and in a house, you don’t want to be in.
Rising mortgage rates don’t necessarily impact the real estate market and mortgage industry. Mortgage rates may keep on rising or they can show volatility due to the rapid rate of inflation. Some indicators like the historic all-time high Dow Jones Industrial Averages show the wellbeing of the economy.
When interest rates are rising and the fed wants to increase interest rates it is normal to fight the risk of inflation. It also means that there is an improvement in consumer activity. When you think that most parts of the economy are based on consumer spending, this can be seen as a positive for the economy that interest rates are rising.
Rising mortgage rates doesn’t mean you should stand on the sidelines and be afraid to get into the game so to speak. You need to think about what actions to take accordingly. Make sure you are prepared for any other scenarios that may come your way. Always remember to do your homework when it comes to mortgages as well. You can take a bad time like rising interest rates and flip it into a positive by assuming an attractive mortgage. Or, you can take advantage of using market conditions to benefit your negotiation for a home. If you’d like some expert advice, please contact us at Loan Consultants at 844-275-2007. Just give us a call or text and we will be happy to assist you.