Mortgage rates have gone up about half a percentage point since the presidential election.
It could be a result of foreign and American investors pulling out of the bond market because Trump’s win or it could be a continuation of a trend that’s been in the works for a long time.
Despite the reason, financial experts say it’s no reason to panic or give up hope on your dream home.
In San Diego, where home prices are already steep, the slightest shifts in rates, can hit hard.
“With a $400,000 loan, if that rate goes up half a percent, that may disqualify you from purchasing that home,” said Matthew Shaver, a senior mortgage consultant with Finance of America.
For a typical 30-year fixed mortgage, a half percentage point bump on a $500,000 loan – the median cost of a home in San Diego –would increase the monthly mortgage payment about $150. That could cost $30,000 to $60,000 over the lifetime of the loan, depending on how much down payment is made.
Mortgage rates follow the bond market in an opposite direction, rising as the bond market drops.
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“The day after the election, the bond market got slammed, just hammered. A massive sell-off,” Shaver said.
But that isn’t the only possibly explanation for the rate bump. Last December, the Federal Reserve had to increase a key rate by a quarter-percentage point, after holding out as long as possible to make the change. Mortgage rates were expected to rise and were already on that trajectory by mid-October.
So what does it mean for borrowers?
Shaver says it’s not the end of the world. Mortgage rates remain at historic lows.
“Don’t panic,” he said. “I think because of everything I follow, and the charts I see, the technical analysis, the bond market will stabilize. It already has stabilized yesterday and today.”
He said some of his clients are choosing to wait it out.
Greg McBride, the chief financial analyst for Bankrate, said he thinks the sharp rise in mortgage rates of the last week can be attributed to speculation that a Trump administration is going to mean more government borrowing, more government spending on, for example, infrastructure and a border wall.
McBride said it’s probable mortgage rates will continue to rise, but it’s no reason to accelerate house hunting.
“You don’t rush to buy a house any more than you’d rush to get married because of a sale at the bridal shop,” McBride said.
In Southern California, a seller’s market where homes get offers the same day they are put on the market, rising mortgage rates might not be entirely bad. Higher interest rates knock some potential buyers out of market, shifting the demand (and a tiny percentage of the power) back toward the buyer.
Still, Danielle Dychter says she’s glad she just refinanced her Scripps Ranch home.
“We had been keeping an eye on (the market) and we feel pretty lucky we got locked into a low rate in October,” Dychter said. “We’re locked in for the next 30 years.”
