How do mortgage rate fluctuations impact local buyers?
With a low housing inventory and mortgage rates pushing toward 5 percent on a 30-year fixed, buyers are acting fast before interest rates increase. Homes are selling in a matter of days, and multiple offers are the new norm in St. Louis. These competitive situations also produce much faster closing times on purchase contracts, which helps strengthen buyer offers on properties when competing with multiple contracts on homes. This motivates buyers to have a strong pre-approval in place so they can act fast in this exciting housing market.
Getting pre-approved gives you a jump-start with the mortgage process and gives the home buyer an advantage in today’s competitive market. A pre-approval also makes for a smoother process and gives buyers a better sense of control with their home searches. With multiple offer situations and owners debating between various contracts, a preapproval can help motivate a seller to be more flexible with your offer. The St. Louis housing market offers great home appreciation, making it an ideal area for real estate investment.
Mortgage rates have increased about two-thirds of a percentage point so far this year, so here is what I do when borrowers ask me about the higher rates:
>> Put the higher rate in dollars and cents to show the impact on a monthly payment. Nobody likes to pay a higher rate, but the dollar amount of the increase is usually less than my customers are expecting.
>> Add historical perspective. Today’s rates remain well below the 6.6 percent average of the last 30 years, so even a full percentage point increase shouldn’t shut the door on a prospective homeowner’s dreams. In fact, many of my customers were raised in homes financed with double-digit mortgage rates.
>> Consider alternatives to the 30-year fixed-rate mortgage such as adjustable-rate mortgages. These products may be an option for a borrower intending to stay in the property for only a relatively short period. As an example, a 7/1 ARM typically has a fixed rate for the first seven years that is lower than the rate on the 30-year fixed-rate mortgage. Of course, in the eighth year and beyond, the adjusted rate may be higher than today’s 30-year fixed rate. There are ARMs that keep the initial rate fixed for five, seven and 10 years. While the rate increase is unpleasant, many borrowers find that buying a new home is still feasible and home ownership is ultimately rewarding.