Interest Rates On Mortgages Are Rising
As the economy has slowly returned to “normal”, the low interest rates of 3.3% on a 30-year mortgage are slowly creeping their way back up. With each positive report coming back on the economy, including the fact that the stock market has had an amazing spring, and the job reports have been averaging 200,000 new jobs per month have all led to higher rates.
Interest Rates Are Returning To Average
Prior to the recession, back in 2003 interest rates hit a 37-year low of 5.23%. Like any other highs and lows for investors all yields and rates typically return to average over time. For future homeowners average could mean roughly 5.5% or higher on a 30-year loan. For those who are hoping to buy a new home this summer and take advantage of the lower rates, it definitely makes sense to do so before rates get any higher.
Mortgage Rates Track With The 10-Year Treasury
To determine where rates are headed, most lending agents track the pattern of the U.S. treasury bonds. Treasury bonds have been climbing higher, with the 10-year treasury hitting 2.21% the end of May. This is the highest we have seen them close out since April of 2012. Typically, the interest rate on a 30-year mortgage averages 1.7-2% higher than the bonds, meaning with the current bond rates we will probably see interest rates for a home loan at around 3.82-4.12%.
How Will Interest Rates Affect The Housing Market?
For the housing market, it is difficult to see at this point if the higher interest rates will deter potential buyers from stepping out and purchasing a new home. Much of the attraction that has bolstered the housing market over the last several years, are the record low interest rates. Currently, with housing prices and interest rates on the rise, it will be interesting to see if the interest for new home buyers continues at its current pace.
If you are considering a home purchase or looking at real estate for investment purposes, it’s definitely worth your time to examine interest rates and determine if it’s actually a good investment opportunity. For more information on interest rates and other aspects of the economy that will have an impact on your portfolio, speak to a Redhawk Wealth Advisor near you today.