How will the mortgage interest rate increase affect you?
The Federal Reserve raised interest rates 0.25 percent last month, which means that mortgage rates are at the highest they’ve been in all of 2016. While rates are still at a historical low, there is talk about the Feds raising them again in 2017. As these rates affect all homeowners with adjustable rate loans and prospective homeowners, we’ve laid out the details of what this increase could mean for you.
Potential Price Drops
As mortgage interest rates increase, so too do the payments. This can have the effect of reducing the qualified buyer pools in New York. Once the real estate industry sees a drop in buyer interest or a widening spread between the asking price and offers, sellers may begin to drop prices.
These price drops may only be seen in the lower tiers of home sales, as the interest rate increases will have a more dramatic effect on monthly payments overall. This is especially true for less qualified borrowers who cannot benefit from the lowest mortgage interest rates.
Cash Buyers May Increase
Rising interest rates typically shift the market to international buyers, who often pay cash for their real estate investments. If rates are more likely to rise again in the near future, cash buyers may emerge sooner.
Easing Credit Conditions
After the housing market crisis, the credit conditions tightened dramatically. If prices begin dropping, more buyers may be able to qualify for a home loan and normalize the market.
Refinancing Less Likely
With the interest rates increasing, it is less likely that those homeowners with a fixed interest rate loan will refinance, as they will not benefit.
Increases in the Federal Interest rate affects more than just mortgage interest rates, so consumers should be careful to calculate how the increase might affect student loans, credit cards and other debt they might be carrying or thinking about carrying.
Thinking About Buying a Home in New York?The attorneys at Ianniello Anderson, P.C. provides their clients with up-to-date, accurate information about the New York real estate market and how it can affect your plans. Serving clients in the Albany, Clifton Park, Glens Falls, Saratoga Springs, Troy, and the entire Northeastern NY areas at 518.350.7755.