The Sky is Falling!

Mortgage ratesThe Federal Reserve Bank raised the benchmark interest rate by .25% yesterday and buyers think the sky is falling! Borrowers who have already locked-in an interest rate to finance the purchase of their home or condo will not be affected by the current rate increase.

Fed rate increases don’t automatically translate to a .25% increase in mortgage interest rates and while rates may jump immediately -current mortgage rates remain very, very low.  Compare the mortgage interest rates in the 1980’s to today’s rates.

Mortgage Graph

Most likely mortgages rates will rise but according to Dan Green author of the Mortgage Reports, the Fed is committed to keeping mortgage rates low.  The build up to the actual rate increase probably had more impact on the stock, housing and other markets than the actual increase made yesterday.  Potential buyers, with marginal credit will probably have to rethink buying a home or condo in the near future.  Snooze you lose has finally struck the fence sitters- waiting for the perfect home and lower rates.

History has proven the real estate market can handle rate increases and thrive.  In some areas where home prices are rising too rapidly (remember the recent housing bust) sellers may have to adjust their pricing expectations.  Rising rates usually trickle down to slightly lower listing prices -to attract more qualified buyers.

So, no the sky isn’t falling. And while rising mortgage interest rates will impact some borrowers I think government over-regulation of lenders and title companies will have greater negative impact on real estate market as vendors either pull out of the business or limit loans to borrowers with the highest credit ratings.