Following years of unprecedented low interest rates, rates have recently been on the rise, but today the Fed came out and announced they will continue to purchase bonds at the same rate. That means mortgage rates will stay the same or even get better. Just today since the announcement, the result was that rates went down one-tenth to one-quarter of a percent. It’s welcome news for Las Vegas homebuyers and those wanting to refinance.
In early 2013, rates were at 3.5 percent. At that rate, there were about 17.8 million renter households with income high enough (at least $36,000) to buy a $177,000 home at 3.5 percent on their mortgage. At the five percent rate, that number drops to 14.9 million people who can afford that same home, pushing many potential buyers out of the market.
In addition to a stabilization in rates, what could help bring in more buyers is the improving employment. Job growth hit 2 million in the past year and the same is expected in the coming year. Another factor that could offset the rising interest rates is lenders easing financing conditions. Lenders are now offering loans to buyers with a credit score in the 720 range compared to the minimum requirement of 760-770 in the past few years. FHA has also lowered its credit score qualifications going from a 680-700 required credit score down to the 660 range.
If Fannie Mae and Freddie Mac reduce their fees, it could help more households buy as well. In the past few years, they have been charging additional fees to help recoup their losses from the housing bust. But recently, Freddie and Fannie have experienced a much improved performance due to strong portfolios and fee increases. Once they repay taxpayers funds used to keep them going during the housing decline, the hope is that they will cut their fees to homebuyers.
So with today’s news, homebuyers can expect the low mortgage rates to continue for the foreseeable future.