The Threat of Higher Mortgage Rates May Pull Stubborn Buyers from the Sideline
August 9, 2011Just a few days after Standard & Poor?s lowered the US government?s credit rating from triple A to double A plus, the United States?based financial-services company followed up by dropping the credit rating for mortgage financiers Freddie Mac and Fannie Mae.
Though experts disagree on how this move will affect the American economy, many expect that it will ultimately cause mortgage rates to climb, resulting in costlier loans for property seekers. Though this could further stall the already struggling mortgage market; in the short term, it may pull reticent buyers from the sideline as they try to take advantage of affordable rates before they potentially climb.
According to Susan Wachter, a financial professor at the Wharton School of Business, many prospective buyers have been hesitant to enter the market, because they’ve been waiting to see if home prices decline further than they already have.
Though this strategy may have seemed like a sound one prior to the S&P’s downgrade, it doesn’t make as much sense with the threat of higher rates looming on the horizon.
Mike Aubrey, host of HGTV’s Real Estate Intervention, says that whatever savings buyers potentially gain in trying to snag property at the bottom of the real estate market, they will likely lose over the length of a 30-year loan if mortgage rates go up even a few points.
According to Aubrey, homebuyers may never see times this good again in their lives, and prospective buyers who plan to live in their properties rather than flip them for profit should move quickly in case interest rates climb.
