However, what this increase signals is a change in the Fed's stance that they are starting to move away from the monetary easing bias. This move came earlier than had been anticipated and the Fed is taking a stand to signal their intent to end their emergency monetary measures that have been keeping rates artificially low for the past year and one half- this includes a leaning toward increasing the Fed FUNDS rate.
This change in bias by the Fed is what the Mortgage Backed Securities (MBS) market is focusing on and the concerns of the investors in these MBS will dictate how quickly we will see mortgage rates increase and just how high they will go.
In addition to this announcement to increase the Discount rate, we are also seeing the end to the massive MBS purchases by the Fed next month. These purchases are one of the main reasons we've seen these artificially low rates and there is doubt that there will be any replacement buyers in volume since the Fed has been purchasing about 75% of all new MBS over the past year and one half.
As you can see, there are many forces at work that are pointing to increased mortgage rates, and this could happen fairly soon.
If you have buyers that are deciding if now is the right time to buy, please share this information with them. Additionally, there is that added incentive of the tax credit as additional reason to consider buying sooner rather than later.
If you have people who are thinking about selling their home and may be waiting for the perfect time - this may be it! With many buyers looking to find something before the tax credit expires and trying to access these lower mortgage rates, we will surely see the volume of purchases surge over the next few weeks and months (it is already happening!!). As rates go up the number of buyers in a given price range will decrease as they must purchase a property that fits their monthly payment goals. We typically do not see buyers increase that monthly payment goal when rates go up. They simply adjust their searches and consider lower priced homes to accommodate their needs. For sellers, this means that there will likely be fewer people looking to purchase your home once rates increase. This should be a serious consideration for anyone looking to delay the listing of their home.
There is no doubt rates are going to increase. The questions are: How quickly they will increase and how high they will go!
This is a serious time for serious decisions for home buyers, sellers and people thinking about refinancing. Now, more than ever, people need to work with trusted advisors that can help identify their goals and provide information for those people to make informed decisions about their options. If anyone you know needs additional assistance with this information, or would like to discuss the potential ramifications of what these changes signal is on the horizon please feel free to call me.
The Valeo-Croy Team - (704) 366-7711
Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421
Accessible | Program Expertise | On-Time Closings
@ The Valeo-Croy Team, we are here for you.
The Valeo-Croy Team and Cunningham and Company Mortgage Bankers are Equal Housing Lenders.
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