Mortgage rates are unexpectedly at a three-year low. Mortgages are important in order to finance a home purchase. Thus, mortgage rates have a great impact on buyers and their buying process. For now, buyers benefit from low rates because it gives them increased buying power.
Rates hasn’t only been down this year, although six of the first nine weeks of the year, rates declined it showed an increase in past two weeks. Following mortgage rates movement is important especially that the peak spring buying season almost here. Buyers shouldn’t be complacent because of the recent movements of mortgage rates.
Potential buyers are greatly affected by these rate movements as it will produce about 1.2% difference on their monthly payment which will affect the monthly budget and their debt-to-income ratio (a critical factor to be considered for a mortgage).
With the given trend the mortgage market increased the buyer’s buying power to about 6% with the low rates but the recent increase diminished 2% to their buying power. Although buyers are still at the advantage, the situation can shift any moment given the recent activity in the market.
As a buyer there are three possible scenarios that’ll emerge from the movement of mortgage rates:
The first scenario depicts a negative view of the economy resulting from global economic weakness and the slump in oil prices from January until early February. This caused the decline of the stock market causing global money to take refuge in the Dollar and U.S. Treasury bonds. As demand for bonds increase, mortgage rates will decrease. With this, rates will remain as they as are now throughout the year.
The second scenario has a moderate view of global economic growth which will result in a fixed rate of 4-4.2% by the end of the year.
The last possible scenario sees increased inflation leading to an increase in mortgage rates to 4.5% and can go up to 5.5% in 2017.
Although these are just possible scenarios, it would be wise to consistently monitor mortgage rate movement in order to prepare for possibilities in the future.