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The wake of the COVID-19 pandemic has caused a variety of economic issues, and one that stands out is the country’s increasingly high mortgage rates. With mortgage rates higher than they’ve been since 2009, what does this mean for you? Read on below to find out.
As of this week, the 30-year mortgage rate increased to a 5.3% annual percentage rate (APR), the highest it’s been since 2009. Economists have split opinions about the future of mortgage rates, with many saying that rates will stay around 5% for a while and some even predicting rates will continue to rise.
Mortgage rates for shorter mortgage terms have still risen significantly from last year but seem to be stabilizing. As of now, the 15-year mortgage rate stands at 4.48%, and the 5-year adjustable mortgage rate is 3.98%.
If you own a home
If you already own a home and aren’t planning to move in the near future, the only effect that rising mortgage rates will have on you is if you look to refinance. Since mortgage rates haven’t been this high in over a decade, it’s unlikely that anyone has a mortgage with a high enough rate for refinancing to be a good financial decision at this time.
If you don’t own a home
The good news is that, if you don’t own a home and aren’t planning to buy one soon, high interest rates won’t directly affect you. Other strained aspects of the economy like gas prices and inflation might still be hitting your wallet, but mortgage rates are one economic indicator you can ignore for the most part.
If you’re planning to buy a home
People who are planning to buy a home in the near future will be the most affected by rising mortgage rates. It may be a good idea to look to lock in a mortgage quickly in case mortgage rates continue to rise, but if rates stabilize and begin falling again, it may be better to wait. This is definitely an uncertain time for the housing market and the rest of the economy, so be wise and consult with a financial advisor before jumping into anything.
Why are mortgage rates so high?
There are multiple factors involved in mortgage rates rising, so no single thing can be blamed for the change. Decisions made by the Federal Reserve have a large impact in mortgage rates, and the interest rate set by the Fed changes how much money banks can access to give loans to homeowners.
Economic growth as the pandemic begins to fade is certainly part of the equation as well. As people get back to work and continue to grow in their careers that were stalled for the last two years, many people will now be in a better financial position that allows them to buy a home. This growing housing market naturally causes interest rates to rise.