The Federal Reserve’s New Rates

With the Federal Reserves announcing that they will start to taper their bond buying policies the 10 year treasury note skyrocketed to a 4 year high. Rates for home loans have gone up almost 1% in just three weeks, the biggest advance since June 2009. The average cost of new 30-year, fixed-rate home loans climbed to 4.24 percent from 3.36 percent in December 2012, according to data, while Freddie Mac states that U.S. mortgage rates have increased 17 percent since the beginning of May, 2013 and 19 percent from the record low of 3.31 percent reached in November 2012. That’s a big change!

What does this mean for you? Well, this can reduce buyer power, since the same loan will now cost you more. Some South Bay and beach cities buyers may have to reduce their purchase price to accommodate the extra interest charges over the life of their loan, while some may need even more complicated changes to their current plan.

However, rates are still quite affordable, in general. While a higher rate does increase the monthly cost of owning a home, the overall interest rate is still low in comparison to where it was, say 10 or 15 years ago. In general, interest rates, even in the 4 percent range, mean that home loans are more affordable that they have been in previous years. In fact, it isn’t rising interest rates, but a lack of inventory and bidding competition from all-cash investors that are still the biggest obstacle for home buyers in the South Bay.

If you have any questions about the recent rising interest rates and the changing real estate markets as you plan your purchase of a South Bay home, contact me. I’m here to help!

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