are the Mortgage Rates Going Up; Earlier this year, the Federal Reserve raised short-term interest rates for the first time in over a decade. The reason? It wanted to slow down the pace of the U.S. economy’s growth. The result? Mortgage rates are going up. When you take out a mortgage for a home, you’re essentially taking out an interest-only loan for the house itself and your monthly payments.
These payments are based on the amount of money you put down toward buying a home and how long you plan to get it (the longer you commit to staying there, the higher your monthly payment will be). With that being said, let’s take a look at why are the mortgage rates going up as well as what you can do about it as an individual or as part of a real estate investment trust (REIT):
— like an apartment REIT or an apartment complex REIT
— if that bothers you and how it might affect your financial goals.
What are the Mortgage Rates, and Why Are They Going Up?
There are the mortgage rates going up for a few reasons. First and foremost, Fed policymakers have been keeping interest rates low for quite some time now. That has been done to stimulate the U.S. economy and get it back on track after the Great Recession. Second, the Treasury market has been very volatile in recent months.
Specifically, the U.S. government is expected to take on a lot more debt to pay for the costs of the growing baby boomer population and the increasing cost of healthcare over the next few decades. That has sent the U.S. Treasury bond market into a frenzy. Finally, the stock market has been a little hot and volatile lately. That leads investors to shift a portion of their portfolio out of stocks and into safer assets, like U.S. Treasury bonds.
What Can You do to Prevent a Mortgage Rate Increase?
The best thing you can do to prevent a mortgage rate increase is to lock in a low rate on your mortgage. Low mortgage rates are great because they help you pay off your mortgage faster. If you can pay off your mortgage faster, you can save yourself some money in interest payments.
If you’re in the early stages of saving for a future home or are still in the market for a new one, low mortgage rates are a great way to save some money on your purchase. And, if you’re currently buying a home, locking in a low rate can make the process go a little smoother and help you close on a house sooner.
Strategies for Managing Mortgage Rates When They Increase
Now that we’ve covered what can be done to prevent a mortgage rate increase, let’s talk about what you should do if are the mortgage rates going up. The key to managing mortgage rates is to think about how long you plan to stay in the house. If you plan to stay in the house for a relatively short time — say, less than 10 years — you might not want to lock in a fixed-rate mortgage. In this scenario, you have a little more flexibility with your monthly payments, and they can stay lower over time, even as interest rates rise. If you plan to stay in the house for a longer time, say, more than 30 years, you might want to lock in a fixed-rate mortgage.
How REITs Can help Protect Against Mortgage Rate Increases
REITs can protect you against rising mortgage rates because they own a large portion of many U.S. mortgages. That makes them an excellent vehicle for “hedging” against rising interest rates. If you lock in a mortgage with a fixed rate, you’ll have to pay more in interest, even if mortgage rates stay the same. And, if interest rates go up, you may not be able to afford to make that monthly payment. That can cause you to default on your mortgage and lose your home.
There are the mortgage rates going up, and they’re expected to stay higher for quite some time. That can cause a rise in mortgage rates — which, in turn, can cause a rise in your monthly payments on your mortgage. That can, of course, be a big financial burden. Luckily, you can do plenty of things to protect yourself and your finances, even if you have to lock in a low rate.