By Lane Stone
I wanted to bring up something that’s been on my mind—interest rates and how they’re affecting homeowners. We’re stepping into a new era of interest rates, and I think it’s really important to understand what’s going on.
The Changing Landscape of Mortgage Rates
So, here’s the deal: more and more people are getting new mortgages with higher interest rates. It’s not just a little shift either. A ton of homeowners are now stuck with interest rates of 5% or more. According to the Intercontinental Exchange Inc. data, about 24% of homeowners with mortgages have an interest rate at 5% or higher as of May 2024. Just two years ago, nine out of ten mortgage holders had rates below 5%.
Why the Shift?
Why is this happening? Well, a lot of it has to do with people moving out of their homes, retiring, or going through life changes that make them sell their homes with lower-rate loans. These older, lower-rate mortgages are being replaced by newer ones with higher rates. In fact, four million first-lien mortgages that started since 2022 have rates above 6.5%, and 1.9 million of those have rates of 7% or higher. (Source: Bloomberg)
What Does This Mean for Us?
This shift in mortgage rates means a couple of things for us. First, if you’re thinking about buying a new home, you’ll be dealing with higher interest rates. You’ll more than likely be the buyer with a higher interest rate, replacing an older mortgage with a lower one. This means higher monthly payments compared to just a few years ago.
But here’s a silver lining: as more people have mortgages with rates closer to the current market rates, we might see more activity in the real estate market. As a matter of fact, it’s already happening. People seem to be more willing to move for a new job or other opportunities, knowing they’re not losing out on a super low mortgage rate.
The Future of Refinancing
Another interesting point is about refinancing. Homeowners with these higher-rate mortgages might jump at the chance to refinance when the Federal Reserve starts cutting rates, which is expected to happen later this year. This could open up opportunities for better rates down the line.
What Should You Do?
If you’re a homeowner or thinking about becoming one, keep an eye on these trends. It’s always good to stay informed about interest rates and how they might affect your finances. And if you’re ever unsure, don’t hesitate to reach out for advice.
Alright, that’s my little update on the housing market and interest rates. Hope you found this helpful! Let’s keep the conversation going—feel free to share your thoughts or questions.
Catch you later! 🏡✨
Sources:
- Bloomberg, “Housing market shift gradually pushing up locked loan rates,” Orange County Register, July 17, 2024.
