When the rates of mortgage are adjusted upwards, first thing that strikes many people is that the cost of borrowing. This will cause fear for the buyers to buy homes. However, it is not always a bad thing to home buyers. Fed pushes the high lending rates as a precautionary measure to prevent an economic crisis. This could pull the entire global economy down like in the 1930s, 1990, and recently in 2008.
After the 2016 presidential election the fed’s are now talking about increasing the interested rates in 2017. So if you looking to buy a home, i would suggest that you start your search now.
In this post, we review some things why high mortgage rates do not always mean it is a bad time to buy a home.
Higher Mortgage Rates Could Spur Property Market Growth
Since 2015, the property market is being predicted to crash sometimes in 2017. When these fears hit the market, the sales take a downward trend. This causes fear and ends up hurting even other sectors of the economy. However, higher mortgage rates push the prices of homes higher reducing the fear of a crash. Home buyers are pushed off the fence by driving demand higher. You will see the raise in prices, and elevating home equity that encourages more people to sell. This will work against the current predictions of an economic downturn, and keep the market and entire economy healthy.
Efforts to raise mortgage and lending rates are always focused on the long term. What the government wants and will go to great lengths to achieve is a stable economy. By raising the rates and stabilizing the property market. What you will see is the home buyer is spared the difficulties of going through the recession period. In a recession, the interest rates shoot up, and many people with mortgages find everything working against them. The higher rates will keep inflation low! Cushion the property market from crashing, and ensure you can continue paying the mortgage smoothly to a logical conclusion.
A Home buyer is assured of credit to buy Property
When the mortgage rates go up, many lenders are willing to loan clients because it means higher profits. However, sellers reduce their property prices to sell their properties because they anticipate a slowdown. A buyer can utilize this window to buy high-value property and hold it until the market becomes strong. Real estate experts insist that a smart buyer should use the situation as a wedge to negotiate for lower rates.
When the Fed raises the lending rates, one of the major impacts is a very strong currency. As more real estate professionals focus on expanding their investments. A stronger dollar will work well against national currencies in the target countries. The overseas market has been cited to hold a lot of potential. Because many nations have emerging cities and their growth over the next decade presents huge potential.
You can still enjoy affordable mortgage by looking beyond hiked interest
Interest rates rise and fall with time. This is a fact that you cannot beat. However, there are other things that can help you get a better deal for higher mortgage value. For example, if you can make some down payment and intend to stay in the house for a long period, the current mortgage rates should not deter you.
- Raise down payment and use FDA (federal administration offers): When you raise some down payment, very many parties are willing to chip in and anchor your mortgage. For example, you can enjoy the Federal Administration offers that are always offered at reduced rates if you raise a deposit of 20%. Besides, the same down payment will relieve you paying PMI (private mortgage insurance) which will bring the overall cost of mortgage lower.
- The length of time you will stay in the new house: If you will stay in the new house for more than 5 years, the cost you are incurring on rent and transport will break even. However, people intending only to take one or two years should not consider taking mortgage when the interest rate is shifting upwards.
- Select the right buying agent: By selecting the right real estate agent, you are sure of taking advantage of the current situation to negotiate a better deal. The real estate agent understands all the property market dynamics and will get you a great deal even with the high mortgage rates.