As you may have heard, interest rates are going up by a quarter of a point. While that may not seem like much, it will most certainly have an impact on housing markets around the country, including right here in Bentonville.
But not to fear, even though rates are going up a bit, if you’re looking at purchasing a new home, now is still a great time to buy. In fact, it may even be a better idea to buy now rather than later. Why? Let’s look at a few things.
What Does This Mean?
Interest rates impact the amount of interest a homebuyer would pay as part of their annual loan. While some of your mortgage goes towards the principal at a fixed rate, the interest rate can differ depending on a variety of circumstances.
Typically, low interest rates are used to energize the economy. During the recession, rates were kept low. Less interest means more money stays in the hands of the consumer and theoretically back into the economy. Now that the economy has rebounded, interest rates are going back up.
The truth is that interest rates can’t stay low forever. During the deepest parts of the recent recession, interest rates were as low as 0.25%, which is effectively 0%. Rates have continued to rise, with .25% increases in 2015 and as recently as last December. The current rate stands at 1.0%
From a societal standpoint, this is actually good news. It signals a strong belief that we’ve left the dark days of the recession behind us, and generally homebuyer and consumer confidence is on the rise. On the other hand, the rate went up and certainly no one wants to pay higher rates.
But Wait! It’s Still a Great Time to Buy!
Given that rates went up instead of down, how can it be that now is a good time to purchase a new home? Well, there’s a few reasons.
The first is that the Federal Reserve doesn’t directly set mortgage rates. In fact, the last time interest rates went up, mortgage rates actually went down. Adding to that, this particular rate hike was widely expected and many experts don’t predict mortgage rates seeing a dramatic change.
The second, and perhaps more important reason, is that rates are almost certain to go up again this year. The Federal Reserve is currently planning three rate hikes in 2017, and that means that the current 1.0% looks to be the low water mark for the foreseeable future.
In general, the Fed likes to keep rates between 2%-5%. This range is seen as the sweet spot for the economy as a whole. While most experts believe that there’s little chance rates will reach 5% this year, somewhere in the 2%-3% range is likely.
The truth is that while rates are going up, they’re still incredibly low! And with an increase to 2% or 3% likely, this may be the best time to think about buying a home before rates go up and stay there long-term.
Are you thinking of moving to the Bentonville area? Why not Contact Us today and let Burnett Real Estate Team interest you in a brand new home.