Mortgages have always been one of the means of navigating the financial constraints associated with acquiring a house. For instance, 63% of homeowners in the US acquire their homes with mortgages.
Sadly, in the past few months, the mortgage interest hike has increased at an unprecedented rate. Worse still, more concern is being expressed by the general public as to whether this upward curve will take a downtrend soon.
We have invited the experts at GreenSprout to enlighten us on whether to expect a drop in the interest rate. GreenSprout is a financial blog that offers expert financial advice that guides its readers to make better financial decisions.
What is your take on mortgage interest rates dropping in 2022?
Well, in my honest opinion, if anyone is waiting for the prices to miraculously plummet to what they used to be, then they can as well wait for pigs to fly. Regardless of the brief dip in mortgage rates, the 30-year fixed rate climbed more than half a percentage point last week, the largest one-week increase in Freddie Mac’s survey since 1987.
The rate for a 30-year fixed mortgage is now 5.65%, compared to just 3.22% at the beginning of this year. Also, the average cost of a 15-year fixed-rate mortgage has similarly skyrocketed: it’s up to 5.06%, compared to 2.43% in early January. So, it is quite apparent that the rates are not dropping soon. In fact, it is predicted to continue the uptrend.
What do you think are the factors that might be responsible for not making it drop?
The foremost factor which has largely contributed to the current state of the situation is inflation. Mortgage rates and inflation are like a swinging pendulum; they go hand in hand.
Another underlying factor as to what might be responsible for not making it drop is world events. Historically, mortgage rates have been affected by events like World War II, the oil embargo in the 1970s and 1980s, the housing market crash in 2007, and Brexit.
And recently, the COVID-19 pandemic and the Russian invasion of Ukraine are particular occasions that are affecting mortgage interest rates.
Is there anything people can do to make their mortgage rates drop?
While some personal factors can contribute to your interest rate being high, you have little to no control. Economic factors, as has been earlier noted, are the contributing elements to the spike in the interest rates.
Notwithstanding an individual’s inability to control such economic factors, GreenSprout is readily available to help guide individuals through making the best financial decisions and sail through this period by means of providing resources on our website.
What are the obvious disadvantages of the rising mortgage rates?
The continuous increase in interest rates can lead to recession. Similarly, if rates rise too quickly, demand may decline, causing businesses to lose and cut jobs.
The domino effect in terms of how it would affect many other sectors, and facets of the country cannot be overstated.
What is the position of ordinary people in this situation? Should they be wary?
Regardless of market conditions, buying a home is a personal decision and entirely depends on the needs of each person. While the average person may be wary of the current market condition, with proper financial planning and decision-making, it is possible to cruise through the current state of things.
With the expert financial advice from the GreenSprout’s website, these concerns can be resolved with professional solutions that meet your particular needs.