"Though higher interest rates typically mean a cooling of demand for real estate, since a purchaser will have a higher payment on the same property, the opposite is happening in the short term."
Austin, TX (PRWEB) June 20, 2013
With a seller's market already, and inventory of available homes at decades long lows, the recent surge in mortgage interest rates that has occurred over the past month has only fueled the demand for the low supply of housing stock even more. The rate for a 30 year fixed mortgage has climbed drastically from just 3.40% in May to 4.16% only a few weeks later, due to speculation that the days of the Fed's easy money policies and bond buying are coming to an end. The reaction in the housing market has been just as swift, as buyers scramble to lock in what is likely the final days of historically low interest rates, as well as a contract on a property for a home or investment to get a loan on.
"Though higher interest rates typically mean a cooling of demand for real estate, since a purchaser will have a higher payment on the same property, the opposite is happening in the short term," explains Vik Vad, a real estate broker and market analyst. "The spike is causing panic buying, and the need for urgency to lock in a reasonable interest rate while they are still low." Although he believes that this knee-jerk reaction will lose intensity in the coming months, Vad still sees demand remaining high for the remainder of 2013 due to these conditions. He has urged anyone who is concerned about interest rates to compare mortgage rates in order to see their effect on the bottom line payment that would have to be made each month, and to factor this in to their budget.
Another effect in the wake of this interest rate surge is the increase in demand of those looking to refinance a mortgage. Many homeowners have waited patiently to find a bottom in interest rates before pulling the trigger to refinance, but have now decided that the bottom may have come and gone, and it is time to refinance immediately. "It's just a matter of using a mortgage calculator to see what your monthly payment would be if you did a refi today," states Vad. "Always take into account broker fees, origination charges, and discount points when making the final decision about whether to do this, as well as how long you plan to hold the property, and what the current rate on your mortgage is."
Mr. Vad has specifically created a page on his website for buyers looking for tools to calculate strategies to help them save on mortgage costs by understanding what they can qualify for, comparing different payment frequencies, as well as different mortgage terms. There is even a section to quantify annual tax savings.
With mortgage interest rates continuing to climb, it is important to plan now, while rates are still at unprecedented historic lows, because such things never last.