Mortgage Interest Rates Rising Faster Than Gas Prices?

mortgage interest ratesInterest rates for a 30-year fixed rate mortgage have climbed from 3.95% in the first week of January up to 4.61% last week, which marks a 7-year high according to Freddie Mac. The current pace of acceleration has been fueled by many factors.
Sam Khater, Freddie Mac’s Chief Economist, had this to say:

Be moderate in your real estate negotiations. Many people want to be aggressive and get the best deal, and they wind up shooting themselves in the foot. Feel sure about the deal that you’re making but always defer to your Realtor, as they can provide some very sensible information.
“Healthy consumer spending and higher commodity prices spooked bond markets and led to higher mortgage rates over the past week.
Not only are buyers facing higher borrowing costs, gas prices are currently at four-year highs just as we enter the important peak home sales season.”

Mortgage Interest Rates Rising Faster Than Gas Prices?

When you are looking into real estate, understand that this could be your home for a long time. For instance, ask yourself if you want to have children. If you do, look for a home located in a good school district.
But what do gas prices have to do with interest rates?

Investopedia explains the relationship like this:

When you want to add more value to the property you own, do some remodeling and repair work. The value of your property will go up quickly. Sometimes it will rise more than you have invested.

“The price of oil and inflation are often seen as being connected in a cause-and-effect relationship. As oil prices move up or down, inflation follows in the same direction.”

You may have noticed that filling your gas tank has become substantially more expensive in recent months. The average national gas price has climbed nearly $0.50 from the beginning of the year, leading to the highest price for Memorial Day weekend since 2014.

During your first meeting with an agent make sure to ask all the questions which are pertinent to your situation. Ask crucial questions, like the number of homes they have sold the previous year and the number you’re interested in currently in your area. A good agent will have this information readily available.

As rates go up, your purchasing power goes down, but don’t worry; rates are still well below the averages we’ve seen over the last four decades.

“Freddie Mac said this year’s higher rates have not yet caused much of a ripple in the strong demand levels for buying a home seen in most markets, but inflationary pressures and the prospect of rates approaching 5 percent could begin to hit the psyche of some prospective buyers.”

Mortgage Interest Rates Rising Faster Than Gas Prices?

When shopping for a home, do not let the home’s decor affect your purchase decision. Your decision as to whether you will purchase a home should be based on the quality of its build and your requirements for sizing. If you buy for decor, you may overlook a serious problem that can cost you later.

TIP! When you are interviewing agents to represent you, be certain to ask them if they reside in the area you are considering — and for how long. If they haven’t been on the job or in the area for that long then they won’t be as up to speed on local restrictions, roads, and schools as someone else would.
Buying sooner rather than later will help lock in a lower rate than waiting, as the experts believe rates will continue to climb. Even a small increase in interest rates can have a big impact on your monthly housing cost.

Bottom Line

Get a home warranty. Get a warranty from the builder if the home is new, or from the last owner if the house is not. Builders should be buying a home costwilling to warranty their home products for a certain time period. Ask if the previous owner is willing to cover the cost of a warranty on your home for a year at minimum, to help offset costs of repairs that might need to be made.

If you are planning on buying a home this year, keep an eye on gas prices the next time you’re at the pump. If you start to feel a big jump in price, know that rates are probably on their way up, too.

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