Why Are Mortgage Rates Increasing?

Why Are Mortgage Interest Rates Increasing?

Why Are Mortgage Interest Rates Increasing? | MyKCM

According to Freddie Mac’s latest Primary Mortgage Market Survey, the 30-year fixed rate mortgage interest rate jumped up to 3.94% last week. Interest rates had been hovering around 3.5% since June, and many are wondering why there has been such a significant increase so quickly.

Why did rates go up?

Whenever there is a presidential election, there is uncertainty in the markets as to who will win. One way that this is noticeable is through the actions of investors. As we get closer to the first Tuesday of November, many investors pull their funds from the more volatile and less predictive stock market and instead, choose to invest in Treasury Bonds.

When this happens, the interest rate on Treasury Bonds does not have to be as high to entice investors to buy them, so interest rates go down.  Once the elections are over and a President has been elected, investors return to the stock market and other investments, leaving the Treasury to raise rates to make bonds more attractive again.

Simply put, the better the economy, the higher interest rates will go. For a more detailed explanation of the many factors that contribute to whether interest rates go up or down, you can follow this link to Investopedia.

The Good News

Even though rates are closer to 4% than they have been in nearly 6 months, they are still slightly below where we started 2016, at 3.97%.

The great news is that even at 4%, rates are still significantly lower than they have been over the last 4 decades, as you can see in the chart below.

Why Are Mortgage Interest Rates Increasing? | MyKCM

Any increase in interest rate will impact your monthly housing costs when you secure a mortgage to buy your home. A recent Wall Street Journal article points out that, “While still only roughly half the average over the past 45 years, according to Freddie Mac, the quick rise has lenders worried that home loans could become more expensive far sooner than anticipated.”

Tom Simons, a Senior Economist at Jefferies LLC, touched on another possible outcome for higher rates:

“First-time buyers look at the monthly total, at what they can afford, so if the mortgage is eaten up by a higher interest expense then there’s less left over for price, for the principal. Buyers will be shopping in a lower price bracket; thus demand could shift a bit.”

Bottom Line

Interest rates are impacted by many factors, and even though they have increased recently, rates would have to reach 9.1% for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.

Posted on November 22, 2016 at 7:12 pm
Annie Hyatt | Category: mortgage lending, mortgage loans | Tagged , ,

You Get What You Pay for in a Lender

Does the lender you choose make a difference in this market?  Oh yes, my friends, it certainly does. Multiple offers happen often here in the Seattle area and the lender you choose can help you get your dream house, but it can also make your offer less desirable if your lender does not have certain qualities.  Even when you are not competing for a home, a lender can make the home-buying experience feel like a piece of pie (I like pie more than cake), or like driving a bus with 40 cranky kids when it’s a full moon.

I have had both experiences with lenders and 98% of how well the deal goes is based on the following:

1. Is the lender local?  In my neck of the woods (Seattle eastside), it is important to choose a local lender for a few reasons.  We are having an inventory crisis which leads to multiple offers.  When you are competing for a house the highest price is not always the winner.  I coach my clients that having a local lender allows for everyone to be in the same time-zone which is important for time-sensitive documents to get to where they need to be in order to close on time. 

Local lenders also use appraisers from a group that specifically works in the area your house is in.  I have had appraisers assigned by an out-of-state lender come from an hour away.  They don't know the area at all and can possibly appraise the home incorrectly. 

Lastly, if you find a good one in town, communication is much easier.  I have called out-of-area lenders and they don't know who I am and they barely know my clients.  Getting emails or calls returned has been a pain in the donkey. As the real estate broker, I always call the lender and if I have troubles getting in contact with them or receiving a response to an inquiry, more often than not they are out of town lenders.

Which leads to the next point:

2. Does the lender communicate efficiently? Oh my word, I cannot emphasize this enough.  When you call or email, how long does it take for the lender to respond?  It shouldn’t take days; it shouldn’t even take hours.  The lender I refer to my people will respond to you within 30 minutes (see Rodney Coulombe’s contact info below). A lender should not make you be a stalker to get your questions answered.  It’s their job to give great customer service (and Rodney is the best at this.)

In addition, a great lender will clearly lay out all of the products for which you qualify.  That awesome rate you saw in the paper or online?  Often, those get you to call in and then mysteriously you can't get that rate.  These are the lenders that are always the hardest to talk to once you have agreed to work with them.  Great lenders don't have sneaky tactics or "special rates".  

Find a lender that makes you feel like you are their only client.  When I started working with Rodney, that's how I felt and I wondered if he was just starting out or didn't have much business.  I was so very wrong… Rodney is just that good. Find yourself a Rodney or call him yourself (see below).

Rodney Coulombe

O: (425) 462-6561 | M: (206) 915-7042 | F: (877) 822-5710

RODNEY.COULOMBE@CALIBERHOMELOANS.COM

CALIBERHOMELOANSINC.COM/RODNEYCOULOMBE

3. Does the lender have a good reputation with your real estate broker? We work with many lenders on both sides of the real estate transaction.  As the Listing agent, I advise my clients to look at the lender as part of the decision process.  If a Buyer makes an offer with a “big box” bank (think Wells Fargo, Bank of America), their offer will be less desirable than the offer with a local, smaller lender who can give us their focus and attention.  Larger lenders have much more on their plate and, I have found, don’t give the clients the focus that is needed to get probably their largest investment closed on time and without penalties. 

My colleagues and I know the ones with the great reputations and we know that those are the ones that will help you win in a multiple-offer situation as well as make the process roll smoothly.  That’s worth the dough (and pie!) in my opinion.

I have clients who kick themselves for focusing on the “cheap rates” at the beginning, because in the end they always get what they paid for: a lender who was impossible to get ahold of and/or who couldn’t close the deal on time (or cut it so freaking close) due to the fact they were too busy or the time difference bungled the deal.

Posted on February 25, 2016 at 3:53 am
Annie Hyatt | Category: mortgage lending, mortgage loans, Seattle, Seattle Eastside | Tagged , , ,