When purchasing a home, many buyers place mortgage rates among their top concerns. Higher interest rates may force buyers out of their dream neighborhoods and into something in a lower price point. How do rates affect today’s home buyers and what might we expect to see as far as mortgages are concerned in the new year?
Mortgage Rates and the Home Buyer
At the beginning of the fall season, interest rates hit 7% and above. According to Freddie Mac, they currently sit at 6.33% and have been steadily decreasing since mid-November. Paul Zgalich with Guaranteed Rate believes that rates may hit well below 6% in late spring/early summer of 2023. The 10-year Treasury note has a major impact on interest rates. Job numbers, unemployment numbers, and the Consumer Price Index all impact the Treasury note. In early 2020, that rate was below 0.5%. Today, however, it’s above 3.5%.
Adjustable-Rate Mortgages
When mortgage rates were super low, it made sense for home buyers to lock in that rate with a fixed-rate loan. However, today’s higher rates may make that too expensive for buyers looking for a new home, especially first-time home buyers. Adjustable-rate mortgages actually run 0.75% to 1% lower than fixed-rate loans. And their rates actually stay at the initial low rate for the first five to ten years. So, if you plan on staying in your home for less than five years, the ARM may be a more economical option for you.
Lock and Roll Program
Guaranteed Rate offers something called the “Lock and Roll Program”. It gives the buyer the opportunity to lock in their interest rate for 90 days, even if they have not found a home to purchase yet. Then, the buyer has 90 days to find a property and sign a contract. Once that contract is signed, you have a 45-day window within which to renegotiate (or “float down”) your interest rate if a lower rate is available before you close. However, you may only exercise this option one time and it must be within that 45-day window. This helps alleviate a buyer’s concern about rates hiking up while they look for their new home.
Predictions for the 2023 Housing Market
Paul believes that 2023 will be a strong market for buyers. We’ve already seen the market shift from the seller’s favor to the buyer’s. Interest rates appear to be on the decline right now. We may even see mortgage rates decrease to between 5.25% and 5.5% during the springtime (when buyer demand hits a high note). The market as a whole seems to be stabilizing much more.
I highly recommend talking to Paul at Guaranteed Mortgage when you’re ready to buy a Jersey Shore home. He’s a straight shooter that won’t steer you wrong. Give him a call at (215) 416-5958. Then, contact me to start the search for your next home.
NJ ANCHOR Program
Another quick reminder, the deadline to apply for the NJ ANCHOR Program is January 31, 2023. It’s easy to let time get away from you during the busy holiday season. Don’t let this opportunity slip through your fingers. If you have yet to apply, do so now.
Sherri Lilienfeld, eXp Realty, Your Source for Jersey Shore Real Estate