Rising Mortgage Rates; (is the sky really falling??)

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Rising Mortgage Rates

Most consumers have no idea what causes mortgage rates to rise and fall, but it’s actually a lot simpler than you may think. When the economy is good and unemployment rates are low mortgage rates rise and when the economy is bad and unemployment rates are high mortgage rates fall. I won’t bore you with charts and graphs and I definitely won’t try to explain how inflation and the world economy play a major role because I don’t want you falling asleep on me. Suffice to say the sky certainly isn’t falling compared to our recent history.

Over the past 45 years, mortgage rate has been as high as 18.63% (1981) and as low as 3.31% (2012) for a 30-year fixed loan. The 10-year average 2007-2017 is 4.996%, which is about where we are now. If you look at the 20-year average you may be shocked to see that it’s 5.87%.  When my parents bought their first home in 1983 their rate was 14% and as my dad loves to say “he was dang glad to have it”.

With the mortgage rate rising, the number one question we get on a daily basis is; “when should I buy”? My favorite answer has always been “buying a house is like planting a tree, the best time to do both is 20 years ago and today”. If you wait around for mortgage rates to improve you may be waiting 3 to 5 years based on historical trends. We are coming out of the single longest stretch in history where rates were consistently the same, between 2012 – 2018 the average rate was below 4%, so it may be a while before we see rates that low again.

Mortgage rates have risen about 1% since January of 2017, so if you would have purchased a $250,000 home with 20% down last year your payment would have been $118.00 less per month. I wouldn’t call that the chump change, but it’s not nearly as bad as the media would have you believe. Owning a home is still the American dream and in most cases your payment is still cheaper than renting.

Sources: American Housing Survey, Freddie Mac Primary Mortgage Market Survey

Jamie Ayala

Jamie Ayala

Jamie Ayala has been working as a Loan Processor at Rock Mortgage for more than 4 years. As a knowledgeable account executive he has had many years of customer service experience in the loan, information technology, and political industries. Recognized for demonstrating a natural aptitude for working with cross-functional teams, as well as for meeting deadlines and validating loan documents, Jamie has a verifyable history of consistently exceeded sales and performance goals. His professional focal points include loan processing, client negotiations, team collaboration, and project management.