WILL MORTGAGE INCREASES DASH HOME BUYERS HOPES?
How will the recent rise in mortgage rates affect potential home buyers’ decision to buy a home? This is the question on the lips of many a realtor and real estate agent this month.
Because in the last couple of weeks mortgage interest rates have crept up to 4.08% (for a thirty year fixed term mortgage). This rise is significant because it is over half a point rise in about three weeks and the rate has not been so high since July 2015.
Real estate brokers Redfin conducted a survey asking precisely this question; would the interest rise deter potential home owners from buying now, or would they carry on regardless?
Their findings suggest that, for now, most people would not stop from trying to buy a house, even if the rate rises went up by another point.
However, the majority of those surveyed did say it would make an impact on the type of property they went looking for. In other words, they would look for something more modest.
Potentially, this could still have an effect on the real estate business, but it shouldn’t signal panic stations just yet.
The survey, which was conducted this year between 7th November and 11th and interviewed nearly two and a half thousand users of Redfin.com about their home buying plans.
From the survey it was revealed that, 34.4% of those asked said that the rise in mortgage rates was ‘very important’ to their decision to buy a home. A following 33.4% reported that they were also “important” to them.
Although, it seems, they were prepared, on the whole to absorb another one point rise in rates without it affecting their decision to buy. Only 7.5% said it would stop them outright from considering a purchase. Most of the respondents did say, though it would make them look for something less expensive (46%).
It would appear, that the average American is not so easily put off in the quest to become a home owner as all that.
Svenja Gudell is the chief economist at Zillow, a real estate data provider and concurs that people indeed have more in their heads than simply mortgage rates when it comes to the decision to buy.
“Most consumers don’t make decisions based on a change in mortgage rates … I think they’re more focused on finding a home that they can afford. If mortgage rates go up by half a percent, that’s not going to make them change their minds.”
And why not, after all, people still need a place to live.