With mortgage interest rates at historic lows, home buyers have been able to buy homes for a more affordable price, and able to buy more expensive homes than during times of higher interest rates. But how does that affect the future of the housing market?
Those who have bought homes at an interest rate of under 4% will not be as inclined to invest in another home when the rate hits 6% or higher. Having the same total mortgage amount for a smaller or less valuable home will seem an undesirable option. Those who were dependent on the low interest rates when buying their homes will be unlikely to move once the mortgage rate rises.
Expect to see an increase in home improvements and renovations as homeowners strive to hang onto the lower rates. Rather than taking on the added expense of the new mortgage, they will make do with what they have and alter that home as needed.
Also, expect to see fewer out-of-area job changes. If the current mortgage allows the homeowner a little more security and a little more expendable cash, they may be hesitant to change that and opt to stay in their current situation and current home.
It is understandable that people want to take advantage of the historically low mortgage rates the U.S. is experiencing of late. Understanding how today’s mortgage news can affect tomorrow’s home buying activity can help you plan accordingly.