In 2015, most people who bought a home did so by obtaining a mortgage. The year’s low interest rates increased buyer confidence and expanded the buying power of those who purchased a home. Can we expect the same conditions for 2016?
Ups and Downs
This year, rates haven’t just declined. They did drop during six of the year’s first nine weeks, but recently, mortgage rates have started to climb. With the country on its way to 2016’s peak buying season, those who are considering a home purchase may be surprised by the recent trends.
Daily interest rates have been volatile. For instance, reports confirm that the industry has seen 23 weeks of lower interest rates, 17 days of higher ones and five days that didn’t shift in either direction. The average daily change for the year is also seeing major movement. For 2016, the change is three basis points. This means that if a rate shifts from 3.47 percent to 3.50 percent, then it’s increased by three basis points. If rates move up by 20 basis points, then homebuyers will be facing a decrease of buying power by about 2 percent.
An Anxious Situation
For potential homebuyers, rate volatility creates an anxious situation. If rates move up by 10 basis points, buyers will face a monthly mortgage payment that is 1.2 percent higher. Rate increases can also affect a buyer’s debt-to-income ratio, and with some lenders, this is a qualifying factor.
If you are in the market for a home, be sure to keep an eye on these shifting rates. They could cause you to pay more than you’ve been anticipating.