With mortgage rates dipping to all-time lows over the past couple of years, homebuyers had no choice but to become spoiled. Many people who purchased a home with a fixed rate of 8% or higher in the 80’s or 90’s were able to shave off five percentage points (or more) in recent years.
Unfortunately, nothing good lasts forever. And this is exactly what we are dealing with right now when it comes to mortgage rates.
Rates continue to climb, with many believing the 5% mark will be hit or eclipsed by the end of 2013.
Despite a recent decline for 30-year fixed rate mortgages, the chance of rates dipping below 4% in the near future is not very good.
Does this mean bad things for the real estate market? Does this mean people will shy away from buying a new home? It all depends on how you look at things.
On one side of the fence, a fixed rate of 5% is much lower than what the market experienced 20 years ago.
Of course, there is a downside. Homeowners who purchased or refinanced when rates were at all-time lows may find it difficult to part with their home. Even if they have a desire to move, if not forced to do so they may stay put due to the amount of money they can save with a lower rate.
Plan Today for Tomorrow
While nobody knows what the future holds, it is best to plan as if mortgage rates will continue to increase. Whether or not this happens is anybody’s guess, and even if rates do climb who knows where the “leveling off point” will be.
Here are three ways to plan today for what may happen tomorrow:
- Make up your mind as to whether or not you want to stay put or move. If you plan on making a move, the longer you wait the better chance there is that rates will increase. This doesn’t mean you should make a rash decision. It does mean that you should consider your options and make up your mind as soon as possible.
- Refinance if you have been thinking about doing so. Did you miss out on refinancing when rates were in the “3’s?” As disappointed as you may be, you can still lock in today at less than 5%. This is a good move for those who are staying in their home and currently have a higher rate attached to their loan.
- Lock your rate as soon as possible. Since we don’t know what the near term future holds, once you are able to lock your rate you should consider doing so. Some lenders will allow you to pay additional money to lock your rate at more than 60 days from closing.
When you look at recent mortgage rate trends, it is easy to see the slow upward creep. By planning in advance, you can minimize any problems this may bring into your life.
