Monthly Archives: November 2014

Will Rising Interest Rates Threaten Your Home Value?

Fast Fact: A 1% increase can cut home buying power by over 10%.

Our Economy Impacts Rates… And Vice Versa

One of the ways our government keeps the economy on track is by influencing interest rates. Think of interest as the cost to borrow and use money. Lowering rates encourages people and businesses to borrow and spend, which helps grow jobs and the economy. Conversely, raising rates has the opposite effect, moderating growth and controlling inflation.

Our government continually monitors economic indicators, such as unemployment, inflation, and gross domestic production, in order to gauge whether the economy is growing too little, too much, or just right, and bases rate decisions on these indicators. A premature move could send the economy back into a downward spiral, but waiting too long can cause inflation. Because government prefers erring on the side of the latter, rates have been kept low.

One of the ways our government keeps mortgage rates low is by purchasing mortgage loans from banks which makes the banks more eager to make these loans. But the government has been scaling back mortgage purchases and, on October 29th, announced that it’s ending  purchases altogether and may take other steps towards raising rates in 2015.

How Do Lower Mortgage Rates Boost Home Sales?

Low mortgage rates mean lower mortgage payments and more affordable homes,which encourages home buying. Higher rates have the opposite effect and can discourage home buying or require that buyers shop for smaller, less expensive homes.

  • A 1% rise in the mortgage interest rate can cut home buying power by over 10%. If a buyer is looking for a $350,000 home, that higher rate can reduce his home buying budget to only $310,000.

Higher rates mean that more of an average homeowner’s monthly mortgage payment will go towards paying the bank interest, rather than saving home equity and building the homeowner’s personal wealth. As a result, home buying decisions, consumer confidence and spending can be impacted.

Higher rates also mean that as many as 3.6 million would-be sellers, who purchased or refinanced their homes when rates were low, will experience “rate lockdown.” That’s what happens when a homeowner is unable or unwilling to sell because doing so means losing his low rate and monthly mortgage payment.

Navigating Rising Mortgage Rates

The good news is that you know what lies ahead and can prepare:

  • Clean Up Your Credit. The most pristine buyers get the best rates.
  • Do Your Homework on Rate Locks. Some lenders offer free shorter term locks or allow you to break a lock under certain circumstances. Some lender lock rates are actually higher than their current market rates without a lock. In anticipation of rising rates, some are already offering lock options as long as 270 days or will even allow you to lock before you find a home.
  • Consider Rate Buy Downs. Eager home sellers are sometimes willing to pay points to buy down your mortgage interest rate, making their home more affordable for you to buy.
  • Adjustable Rate Mortgages (ARM). ARMs earned a nasty reputation when the real estate bubble burst, but under the right circumstances, an ARM can increase your buying power and reduce your monthly payment.
  • It Pays to Negotiate. Savvy borrowers with decent credit pay one-quarter to one-half of a point less than average borrowers!

Share your own tips for navigating rising interest rates by emailingasktheexpert@shariolefson.com.

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Northeast Louisiana REALTORS® See Increased Member Involvement

The Northeast Louisiana Association of REALTORS® is seeing record member involvement and contributions as it implements a new strategic plan emphasizing local advocacy.

Covering a 13-parish area, the association advocates for fair housing, affordable homeownership and the free transfer of real estate. Member contributions fund association political action committees.

Because members put their money where their political interests are, the association has been able to oppose a Louisiana transfer tax and flood insurance legislation.

The Northeast Louisiana Association of REALTORS® also is redesigning its website to make it a hub of consumer information on buying and selling a home—as well as a one-stop site for flood insurance information.

The association constantly is working to protect Louisiana homeowners and save them money. REALTORS® serve as the voice of consumers in front of the state legislature and work tirelessly to drive home REALTOR® messages to policymakers.

Louisiana REALTORS® Uphold Public Official Independence

The Northwest Louisiana Association of REALTORS® recently asserted its leadership to uphold the independence of a key regional planning official, in accordance with the law.

The new Shreveport/Caddo Metropolitan Planning Commission (MPC) provides planning and zoning services for the City of Shreveport and the Parish of Caddo. The commission’s decisions impact growth, development and real estate values in the metro area.

The MPC’s executive director role is crucial to the commission and the community, and so a number of local political figures attempted to assert and expand their power by naming the new executive director.

However, under the law, it is the responsibility of the MPB board to appoint the new director: The Northwest Louisiana Association of REALTORS® wrote a public letter offering its professional resources and expressing confidence in the board’s autonomy.

Highlighting the difference between politics and advocacy, the association advocated for a fair legal process—not a particular candidate.

In the end, the MPC board autonomously appointed a new executive director, Mark Sweeney. He began work October 1.

The Northwest Louisiana Association of REALTORS® is one of the oldest real estate associations in the country. It uses its vast experience to advocate for changes that positively impact local government and homeowners.

Massachusetts REALTORS® Provide Key to Affordable Housing

The REALTOR® Association of Pioneer Valley was awarded the “Ambassador for Cities” award from the National Association of REALTORS® for helping prospective home buyers find affordable housing in Massachusetts.

The association is a leader in the public-private partnerships that provide affordable housing programs for Springfield and Holyoke, MA.

REALTORS® helped arm Massachusetts home buyers with information and contacts for the home-buying process by creating two local websites: BuySpringfieldNow.org and BuyHolyokeNow.com.

The REALTOR® Association of Pioneer Valley also provides training and educational opportunities to its members, informing them about new affordable housing programs and solutions to common hurdles to homeownership.

These local REALTORS® then serve as knowledge guides to prospective home buyers, directing them to programs and supportive local vendors.