Rates are going up, who cares?

As anticipated the Fed announced this last week that the facility used to purchase mortgage backed securities will be wound down at the end of this month. This along with a couple of other "manipulators" has kept rates in the 5% range since late November 2008.



Advice to potential buyers and refinancers, get em while they are hot or expect rates in the high 5%'s or low 6%'s. Not that I would suggest a potential client buy a home or refinance just because of a particular rate. I am not a mouthpiece for the National Association of Realtors and I don't believe anytime is a good time to buy a home.



The conversation that every potential borrower should have with themselves is the one that cannot be based on any perceived sense of the state of the market. A borrower's metrics should be based on their personal situation:

Can my household budget handle the potential costs of maintaining a home beyond the mortgage payment? After all, not being a renter means you pay for the water heater that goes out on Christmas eve.

Am I buying the home to live in or as an investment? If you are going to live in it then I would challenge the theory that it is an investment that will offer you any rate of return over a short period of time that could be perceived as investment grade.

Does the use of the tax credit make sense to my situation? It may surprise some to learn that a few borrowers look at getting $8000 in exchange for a $200,000 mortgage as a bad idea. Can't say I have very many arguments against that.



Those of us older than 30 know that rates now are historically low. Even at 6% or 6.5% they would still be classified the same. I would expect if rates were to spike in the next few weeks the pool of potential borrowers will dry up. At least until they reset their expectations of where rates are. At which point, they will come back.