It was only a couple years ago that we were able to snag historically low mortgage rates. Now, it’s quite a different story, and many people are super reluctant to roughly double their awesome rate by buying or refinancing. But is this situation going to become the “new normal” going forward?”
Here are Five Fast Facts on high interest rates on mortgages becoming normal:
- 🗺️ The Roadmap - The Fed is still expected to reduce interest rates a couple times over the course of the year. This is to help bring/keep inflation down, but it’ll also help people looking to buy or refinance a home. But mortgages aren’t quite as popular for investing in the financial markets now as they were a couple years ago so it’s not really having much effect.
- 🤏 It’s The Little Things - One reason is that mortgage bonds aren't bringing in the big bucks like they used to. Investors aren't flocking to them as much these days. It might not sound like much, just a measly 0.5%, but when you're talking millions or even billions, that tiny half a percent adds up faster than a rabbit on roller skates! 🐇💨
- 🚫 No Mas, No Mas - The Fed and banks both appear to be reluctant to buy mortgage backed securities, probably because they’ve been burned by them a couple times in the last few years. Is this an example of them learning from their mistakes? We hope so (we just wish it was a mistake with their own money rather than ours)!
- 🔍 Looking Ahead - Economists are forecasting that mortgage rates will actually go up, from 5.9% to 6.4%. In 2025 they’re expecting it to just tick down to 6.2%, so they’re not expecting much improvement any time soon. As a consumer, doesn’t that just give you a warm fuzzy about the future?
- 🎤 Consumer Actions - Speaking of consumers, we’ve been having an influence on this situation, too. Because of the historic mortgage rates several years ago, a lot of folks have interest rates of 2-4% on 30-year fixed loans, and they’re hanging onto those harder than Taylor Swift clutches her microphone. That put a major slowdown in the industry (35% shrinkage from 2021) and further compounded the problem.
🔥Bottom line: All this adds up to the likelihood that mortgage rates are going to stay high, at least for the foreseeable future. That sucks for our Paychecks, of course, but knowing this information at least helps us make better decisions along the way.
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