Many economists are predicting with the US debt rating being downgraded that mortgage rates will increase by about one half of one percent. To date, they have not done so. So let’s look at what this means for the consumer in general terms should this happen. As I write this getting a mortgage in the mid 4% range is still very attainable for qualified borrowers. If we see an increase such as the economists predict they would likely move into the low 5% range.
How many of you reading this think a mortgage rate in the low 5% range is all that bad? Of course you don’t because that is still a great rate. Many of us remember rates in the double digits, some over 15%. So now for a second let’s use a little bit of common sense when we consider if we were to buy or sell a home, would you choose not to do so if the mortgage rate was 4.5% compared to 5%. In most cases the answer would be no. What you may see if rates increase is a slow down within the housing market for a few months as a result of the negative press the increase in mortgage rates will receive. Past experience tells us when the media talks about increasing interest rates, the market seems to slow for 60 to 90 days as the consumer digests the information.
So in a nutshell if what they are predicting is true, we should see a slight increase in mortgage rates, which will affect some consumers looking to refinance but should not influence the purchase housing market locally. With that being said, the negative press the subject receives could slow the market temporarily as consumers digest the information. One thing to remember, rates remain at historic all time lows.