After years of historically low interest rates, rates are now on the rise. How high will they go? And what will these mean for the average homebuyer?
The Motley Fool recently tackled this question.
The website notes that economists differ in their predictions of how high rates might go. Experts at The Mortgage Bankers Association predict a 4% rate by the end of 2022.
Any rise will likely spur the following developments, according to The Motley Fool:
Less competition for homes: “Buyers will pull back slightly as higher rates make homes less affordable, and there should be fewer bidding wars for those still on the market,” notes the website. This could also help buyers avoid some of the more risky tactics they were forced into last year—things like waived inspections or appraisal contingencies.”.
Fewer refinances: In just the first half of 2021, notes The Motley Fool, $1.6 trillion in loans were refinanced. “Lenders were inundated with refinances…” However, even small rate increases can make the process, with its associated fees, less appealing to many.
Slower price increases: With record price increases for homes in recent years, prices will remain high, but growth will slow, giving relief to buyers. “Freddie Mac forecasts home prices will rise just 2% for most of this year…while property data firm CoreLogic predicts about a 6% increase.”
The Motley Fool advises those interested in refinancing to move quickly to get the lowest current rate, and for buyers to carefully assess any potential purchase to be certain they can afford the monthly payment.