Rising rates concern buyers
By Jesse Darland
CTW Features
About half of potential homebuyers consider rising interest rates to be one of their top concerns, according to a recent survey from Zillow Group Mortgages. This is the first time in several years interest rates have been a major concern.
The recent mortgage rate increases have been a direct result of the U.S. presidential election and federal rate hikes in December 2016 and March 2017. Because additional federal rate increases are expected in the near term, likely two more, interest rates have the potential to have a serious impact on market activity and overall affordability.
The survey was conducted among respondents currently searching for or buying a home. Their top concern was their ability to find an affordable home despite low available inventory (65 percent of respondents). Concern over rising interest rates was the second most reported (53 percent of respondents).
This is a change from the last time the survey was conducted in 2015. In that survey, homebuyers rated interest rates third on their list of concerns (50 percent) behind saving for a down payment (59 percent) and their ability to find an affordable home (73 percent).
In spite of these worries, most potential homebuyers don’t expect any immediate changes to their plans. More than 4 out 5 buyers (83 percent) intending to make a purchase within the next three years plan to stick to their plans even if rising rates increase their monthly payment by $100. Nearly half (49 percent) would continue with their plans even if the rising rates add an additional $200 to their monthly payment.
Still, rising rates will have an impact. A quarter of respondents stated they would consider looking for a smaller home or a home in a cheaper community if monthly payments were to increase by $100. That number rises to 38 percent if monthly payments increased by $200.
“For years, falling interest rates have been a boon to the U.S. housing market, keeping monthly mortgage payments low for first-time and move-up buyers alike, even as home values rose,” said Erin Lantz, vice president of mortgages for Zillow Group. “As rates rise this year, first-time buyers and those looking to buy in expensive markets where affordability is already an issue will feel the pinch of higher rates on their budget. That said, for most borrowers, there is quite a bit of head room for rates to rise before home-buying becomes unaffordable.”
© Content That Works
