Why Have Interest Rates Jumped?
According to Freddie Mac, mortgage interest rates have risen to a 7-year high. At the beginning of this year, interest rates for a 30-year fixed were hovering around 3.95%. Now, interest rates have risen to 4.6%. The reason for the climb can be attributed to several factors.
Freddie Mac's chief economist Sam Khater recently said, "Healthy consumer spending and higher commodity prices spooked bond markets and led to higher mortgage rates over the past week. Not only are buyers facing higher borrowing costs, gas prices are currently at four-year highs just as we enter the important peak home sales season."
How do gas prices affect Interest Rates?
Investopedia explains: "The price of oil and inflation are often seen as being connected in a cause-and-effect relationship. As oil prices move up or down, inflation follows in the same direction."
If you have been to the gas pumps recently, you may have noticed the cost to fill up has risen over the past few months. Overall, the national gas price average has increased .50 since the beginning of the year, leading to higher gas prices as we approach Memorial Day Weekend... the highest price since 2014.
As interest rates increase, purchasing power decreases. However, rates are still far below averages from the last forty years.
Freddie Mac said recently "this year's higher interest rates have not yet caused much of a ripple in the strong demand levels for buying a home seen in most markets, but inflationary pressures and the prospect of rates approaching 5 percent could begin to hit the psyche of some prospective buyers."
Experts believe interest rates will continue to increase, buying now and locking in rates rather than waiting may be a smart strategy. A small interest rate increase can have a significant impact on your monthly housing expenses.
If you are considering buying a home this year, take notice of gas prices every time you fill up. If you start to see prices spike up, understand that interest rates may soon be on the rise too.
Give us a call today to help get you in to your new home before rates rise further.
Fort Lauderdale Neighborhoods
Disclaimer:The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. John Sabia PA and Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. John Sabia PA and Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.