What Homebuyers Should Know About the Rising Mortgage Rates

The past couple of weeks have been a whirlwind of activity for the housing market. Here’s what potential homebuyers should know about mortgage rates rising, and why there is no need to panic.

fingers on tiny blocks with a percentage sign and arrows

Take a Look at Recent Stats & What They Mean for the Market

  • Mortgage rates rose to 5.78% last week, the highest since 2008.
  • Mortgage applications to purchase a home rose 8% this week, compared to last week.
  • Total mortgage debt is now less than 43% of current home values, the lowest on record.
  • Active inventory nationwide is up 17% year-over-year.

Bidding wars have driven the price of homes up, requiring homebuyers to get bigger mortgages. However, the market is starting to cool, bidding wars will likely not be the norm forever, and homes are continuing to sell just as fast as ever; this is in part because housing inventory is finally starting to go up.

While high home and mortgage prices may push some out of the market, high rent is still a concern. Also, prospective homebuyers may worry prices will go even higher, and so they stay in the market.

In other words, while the market is cooling, it’s still thriving, and we’re not going back to 2007.

Know That Lending Regulations Have Tightened

Part of the reason why the housing market is not expected to crash as it did about 15 years ago is because of new, tightened lending regulations. Lenders are now stricter, there aren’t as many risky loans, mortgage delinquencies are down, and adjustable-rate mortgages are more attractive.

Adjustable-rate mortgages, compared to the average 30-year-mortgage, offer lower interest rates and can usually be fixed for terms of five, seven, or 10 years. They’re typically considered riskier because of the potential to adjust to higher or lower rates. However, they’re now underwritten much more stringently than they were during the last housing boom.

See How Prospective Homebuyers Should Proceed Now

Homebuyers should place themselves in a good position to buy, much as you would at any other time: Ensure a steady income, save up for a down payment, and pay off your debts before beginning the house-buying process.

It’s also advised at the moment to take your time choosing a lender, because they’re all offering different rates for the same individual.

Those looking to sell should keep a steady head, as well; homes are selling even faster than they were one year ago.

Are You Looking to Buy or Sell in the Lake George/Saratoga Region?

Adirondack-style house
Photo credit: Alan Nudi

We’ve taken a look at nationwide trends important for anyone in the housing market to be apprised of, but if you’d like to get more specific with your real estate needs locally, that’s what I’m here for!

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