Why Rising Mortgage Rates Push Buyers off the Fence

You’ve probably heard?mortgage rates?are rising and have wondered what that means for your clients. Since mortgage rates have increased over?two percentage points?this year, it’s natural to think about how this will impact your clients’ homeownership plans.

Today, buyers are reacting in one of two ways: they’re either making the decision to buy now before rates climb higher or they’re waiting it out in hopes rates will fall. Let’s look at some context that can help you understand why so many buyers are jumping off the fence and into action rather than waiting to buy.

A Look Back: How the Current Mortgage Rate Compares to Historical Data

One factor that could help your clients make a decision to buy now is how today’s mortgage rates compare to historical data. While higher than the average 30-year fixed rate in recent years, the latest rates are still comparatively low when you look at the bigger picture of where rates have been since 1971 (see graph below):

Mark Fleming, Chief Economist at?First American,?explains?it like this:

“. . . historical context is important.?An average 30-year, fixed mortgage rate of 5.5 percent is still well below the historical average of nearly 8 percent.”

If deciding whether to buy now or wait, this is important context to have. Today’s mortgage rate still gives a window of opportunity to lock in a rate that’s comparatively lower than decades past.

A Look Ahead: What Happens if Rates Climb Further

The?buyers?who are springing into action now are also motivated to make their move because they know rates have risen steadily this year, and they’re eager to get ahead of any further increases.

Why? When mortgage rates climb, they impact the?monthly mortgage payment?on the home your clients are buying. Basically, it’ll likely cost them more to buy a home if they wait. Experts say mortgage rates will rise (although more moderately) in the months ahead. Odeta Kushi, Deputy Chief Economist at?First American,?explains:

“. . . ongoing inflationary pressure remains?likely to push mortgage rates even higher in the months to come.”

So, if your clients are ready and financially able to buy now, it may make more sense to get off the fence and make the purchase sooner rather than later. As Nadia Evangelou, Senior Economist at the?National Association of Realtors?(NAR),?says:

“With even higher interest rates on the horizon, I don’t see any reason to hold off from purchasing a home right now. If you feel financially secure, you should start looking for a home.”

At the end of the day, there is no perfect advice on when to buy a home. It depends on individual goals, finances, and personal situation. This information with the help of local real estate professionals, like yourself, will help your clients make an informed decision on what’s best for them. The?Mortgage Reports?sums it up?best:

“. . .?if you’re on the fence about whether to buy now or wait for a better deal, buying sooner rather than later might be wise. That said, home buying is always a personal decision. Whether you should buy in 2022 depends on your financial situation and the local housing market where you live.”

Bottom Line

For many buyers, rising mortgage rates are motivating them to act now and make a purchase before rates rise higher. To decide what move works for your clients, connect them to get pre-approved with one of Sprout Mortgage’s experienced local loan officers.

Disclosures:

All loan programs and availability of cash proceeds are subject to credit, underwriting and property approval. Programs, rates, terms and conditions are subject to change without notice. Other restrictions apply.

Sprout Mortgage, LLC, NMLS# 1844521 (www.nmlsconsumeraccess.org), 1680 SW St. Lucie West Blvd, Suite 208, Port Saint Lucie, FL 34986, 800-403-7518. For complete licensing information, visit?www.sproutmortgage.com/licensing. Equal Housing Opportunity.?

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