Interest Rate vs Mortgage Interest Rate

Interest rates continue to increase. The Federal Reserve Bank has increased rates this year and is expected to make another increase on September 21, 2022. We are all hoping that the rate is not another 75 points. At the beginning of the year, it was projected that the Fed would make 6 increases in 2022.

Unlike the interest rates, the mortgage rate for a long-term loan dropped a smidge. On July 22, 2022, the rate was 5.84%. On July 29, the rate was 5.57%.  On August 12, the rate was 5.46%. Todays mortgage rate for a 30-year loan is 5.598%, per Bankrate. We will see if the mortgage rate starts to climb again.

So how can that be? Why did the interest rate increase and the mortgage rate decrease? Interest rates affect short-term loans, not long-term loans such as mortgage loans.

There is a sincere feeling of insecurity with the talk about a market crash. However, I do not envision a market crash such as the one in 2007/2008. The reasons why the market crashed in 2008 are not the same reasons this time around. I anticipate listing prices to decrease a bit while the interest rate continues to increase.

Last month the unemployment rate increased. More jobless people will affect our economy. Less people will not qualify for a home loan. Less people will apply for a loan. The price of food, entertainment, furniture, etc continues to increase hence the interest rate. The Fed increases the rates in order to help with inflation. It is unpredictable what will happen 6 months down the road because there are so many factors to consider.

However, there are buyers still buying and sellers selling. The market will continue to move - at a slower pace, or not, but it will move.

If you are a buyer and are currently leasing, its not a bad idea to think about buying. As a tenant, you are not earning a penny for your future. If you were a homeowner, you would be building equity with your property. The increase in property prices was between 16% - 18% per year for the past two years.  If you had purchased a couple of years ago, you would already be selling for a profit. Your profit would be more than the interest the bank pays you on your down payment of 20% of a home loan.

I see listings from homeowners that purchased two to three years ago. For example, they purchased it at 300,000 and have placed the property on the market for 417,000.

Let me know if you have questions about buying or selling. Follow me: FB @JuanaAlmeida007, Instagram - HoustonHomesForSale2021.