Financial experts say the inevitable has finally happened: home mortgage interest rates are on the rise again. For the fourth week in a row, home mortgage rates ticked upwards.
Wall Street has been waiting for the Federal Reserve to raise short-term rates as the economy recovers from the Great Recession, and credit markets are no longer waiting for the Fed to act.
Every month, the Fed meets and finds a new reason to delay raising short-term interest rates. Interest risk is gauged by the difference between short and long-term Treasury rates, while credit risk is measured by the difference between corporate and Treasury securities.
And due to careful action by the Federal Reserve, these risk rates have been kept artificially low as the economy recovers, albeit it slowly and inconsistently. However, the Band-Aid may finally be coming off as financial markets take matters into their own hands.
After years of waiting, the status quo is changing; home mortgage interest rates are once again on the rise. However, that’s not necessarily bad news.
Experts say that as rates begin to rise, more potential buyers will come to the table seeking professional loans. That might seem counter intuitive, but many buyers will be afraid that they will miss their opportunity to get the lowest home mortgage interest rates for years to come.
Therefore, the rise in home mortgage rates over the last four weeks could actually lead to a more robust housing market overall. In March 2014, cash home buyers accounted for almost 45% of all home sales. As interest rates continue to trend upwards, even more cash buyers could enter the market.
And for those Americans looking to buy their first or second home (and who don’t have $200,000 in cash just lying around), they better hope they’re credit score didn’t take too many hits during the recession. Those with scores below 740 won’t get the best mortgage rates no matter what happens in the marketplace.