Today, everyone in the real estate business—and every potential homebuyer—is keeping a close eye on interest rates. We know that even a small rise in the mortgage rate can make a significant difference in your monthly payment and long-term costs.
While no one can predict exactly what the future holds, in 2013, several key factors are coming together to influence the direction of these rates. Here is what you need to keep in mind:
1. The Employment Factor
Generally, as unemployment numbers go down, it signals a strengthening economy. Higher employment typically means more people can afford housing. However, the type of jobs matters; if new employment isn't reaching the higher end of the salary scale, the overall influence on the housing market may be more gradual.
2. Growing Consumer Confidence
As confidence in the 2013 recovery grows, more buyers are entering the market. This increased demand is beginning to reduce inventories, which creates a more competitive environment for those looking to buy.
3. Banking and Credit Requirements
The overall health of the banking industry plays a major role. We are watching closely to see if and when banks begin to loosen their credit requirements, making it easier for qualified buyers to secure financing.
4. The Federal Reserve’s Watchful Eye
While these local factors take place, the Federal Government, through the Federal Reserve Bank, is deciding whether to "bump up" the prime rate. For the foreseeable future, there is little evidence that interest rates will be dropping back to previous lows.
The Simple Truth: Rates and the Economy
A look at the past fifteen years shows a simple truth: mortgage rates have historically been higher when the economy is performing well. Since that is the direction in which we appear to be heading in 2013, the window of opportunity for these record-low rates may be narrowing.
My advice to buyers remains the same: Act now. Securing a rate today protects your purchasing power before the next economic shift.
Ready to see how today’s rates affect your move?
