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Let's say the average mortgage rate now is 4.00%, and tomorrow, Fed decides to raise interest rate in September, say by 0.25%. Will mortgage rate in August:
A) Stays around 4.00%;
B) Goes up to 4.25% in anticipating the September rate hike; or
C) Rate goes up, but not at the September rate, but higher than the current rate.
Let's say the average mortgage rate now is 4.00%, and tomorrow, Fed decides to raise interest rate in September, say by 0.25%. Will mortgage rate in August:
A) Stays around 4.00%;
B) Goes up to 4.25% in anticipating the September rate hike; or
C) Rate goes up, but not at the September rate, but higher than the current rate.
If you could forecast precisely, you could make a fortune.
Having said that, I think current mortgage rates are pricing in a 25 bps increase in September with about 60% likelihood, so my guess is if a Fed increase comes to pass, you might see mortgage rates jump up about another 10-15 bps from where they are now. But there are a ton of variables here, including a larger-than expected increase or a smaller/non-increase.
Key takeaway: the mortgage market has already priced in expected future rate increases, weighted against expected likelihood.
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The way homes are selling in 1-3 days with multiple offers over asking here (often cash), I would think that only an interest rate back up to about 6-7% would make a difference.
With the average home in the $600-700,000 range, that means the monthly payment would go from $2,800 to $3,600/month with about $100k down.
The way homes are selling in 1-3 days with multiple offers over asking here (often cash), I would think that only an interest rate back up to about 6-7% would make a difference.
With the average home in the $600-700,000 range, that means the monthly payment would go from $2,800 to $3,600/month with about $100k down.
If that happens people will
have the 800 bucks additional per month to cover the higher cost
the house prices will have to come down to make up for the higher interest rate
Housing prices will stay high with fewer buyers that can afford the higher cost
Have to get some huge raises to bring up affordability.
No way the FED will let rates go 30-49% higher overnight. Too much of a shock. It would throw the market off a cliff
Let's say the average mortgage rate now is 4.00%, and tomorrow, Fed decides to raise interest rate in September, say by 0.25%. Will mortgage rate in August:
A) Stays around 4.00%;
B) Goes up to 4.25% in anticipating the September rate hike; or
C) Rate goes up, but not at the September rate, but higher than the current rate.
The Fed rate that is discussed in the media does not relate to mortgage rates. Mortgage rates follow the 10 year bond market, not the short term overnight funds rate. Bond prices change based on things like overall economy, stock market performance, dollar vs. foreign currency and commodity prices. It is virtually impossible to estimate mortgage rates but it is clear that the long term trend will be upward.
The Fed rate that is discussed in the media does not relate to mortgage rates. Mortgage rates follow the 10 year bond market, not the short term overnight funds rate. Bond prices change based on things like overall economy, stock market performance, dollar vs. foreign currency and commodity prices. It is virtually impossible to estimate mortgage rates but it is clear that the long term trend will be upward.
Yeah the long term trend will be upward. I mean right now it's almost free money at what 3-4% rate? Any lower the bank will have to pay you to borrow. Lol negative interest loan.
Yeah the long term trend will be upward. I mean right now it's almost free money at what 3-4% rate? Any lower the bank will have to pay you to borrow. Lol negative interest loan.
The rate that newtoks is referring to is actually ZERO already. In some countries it is "negative". If you think about the easing that the Fed has done, it literally is "free" money. As long as you're one of their official dealers. aka Wall St
People will tend to think that the economy is run by housing, but it's deceptive. Everything runs off credit and since RE tends to be the biggest credit drivers it matters in the big picture. When credit tightens it hurts... and can snowball.
The rate that newtoks is referring to is actually ZERO already. In some countries it is "negative". If you think about the easing that the Fed has done, it literally is "free" money. As long as you're one of their official dealers. aka Wall St
People will tend to think that the economy is run by housing, but it's deceptive. Everything runs off credit and since RE tends to be the biggest credit drivers it matters in the big picture. When credit tightens it hurts... and can snowball.
Yeah RE is a portion of the whole economic picture. But it's one of the more easily seen but probably misunderstood by the average consumer IMO.
Last edited by Electrician4you; 06-18-2015 at 11:10 PM..
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