The following is a staff writer post from Libby Balke. She’s an amazing writer, work-at-home mother of two, and has been married almost 8 years. Please leave any questions or comments below for either Libby or Crystal.
I hope you're reading that title as a sarcastic, farcical headline, otherwise you probably think I'm a raving lunatic or a bossy jerk. But the fact is, I've read a gazillion news articles over the past few weeks admonishing would-be homeowners and those thinking about refinancing to do it rightthissecond or risk skyrocketing mortgage rates.
“Skyrocketing mortgage rates?” I found myself asking after reading a series of these doomsday articles. How high would mortgage rates go? 7%? 8%? 10%? My parents remember buying their first home together almost 35 years ago with a 12% rate – was this the future of mortgages in America, I wondered?
Then I read this from CNBC:
“Everyone is FREAKED OUT about the possibility that mortgage rates–which are roughly tied to 10-year Treasury yields–could go through the roof. How much? They're four percent now, but everyone is concerned they could go to six percent.”
I want you to focus on the last two words of that sentence: six percent. Seriously, the financial crisis, mortgage meltdown, and subsequent housing recovery have altered our worldviews on what is and is not a good interest rate on a home loan to the degree that we now freak out over a six percent rate? When my husband and I bought our first house – not 35 years ago like my parents, but seven years ago – it came with a 6.875% interest rate. And guess what? We survived.
Now, I understand that a jump of two percentage points from today's average rate of around 4% to the doomsday prophecy of 6% would dramatically alter the housing landscape. As Bob Pisani, the author of the CNBC article I quoted above, writes, “It would add about 25 percent to the monthly cost of a home.” I understand, that's a lot of money, and it could lock a lot of people out of the housing market. I get that.
But at the same time, I've read a lot of articles suggesting that at today's super-ultra-ridiculously-low mortgage rates, a lot of people who shouldn't necessarily be in the housing market in the first place are buying homes they may not really be able to afford. I've even seen articles suggesting that all this buying power could lead to a second mortgage meltdown, and housing prices dropping even more than they have over the past few years. Yikes.
The fact is, though, that it is unlikely – at least in the next few years – that interest rates are going to return to the rates we saw before the Recession. The Fed simply doesn't like to let things spiral out of control that quickly. That doesn't mean they aren't going to let rates rise at all; but if you don't think you're going to be ready to refinance or buy a home for another six months, you'll likely be looking at interest rates in the mid-4s, instead of the 3s, where they've been on and off for much of the past year.
Are you thinking about refinancing or buying a home? How much does the idea that interest rates may be on the rise affect your decision to buy or refinance now – or hold off for a little while?