An article published by CNN Money explains: "If history is any indication, the recent spike in mortgage rates is going to have little to no impact on home prices, according to a new report from Fannie Mae," and, "History suggests that interest rate increases at the level recently witnessed will not stop the current housing recovery."
The study that Fannie Mae conducted to come to this conclusion looked at mortgage rates for the last 23 years, going back to 1990. Researchers found two significant interest rate spikes: one in 1993-1994 and one in 1998-2000. While the increase in interest, which climbed to 9.2 percent during the first spike and 8.5 percent during the second, may be expected to have a significant effect on housing prices, the article asserts that values dipped slightly during the first spike and stayed level during the second.
Pickel asserts that, in addition to not having a strong impact on housing prices, the current increase in mortgage rates will not have a strong effect on the number of homes that are purchased. He believes that, ultimately, buyers are still going to want to take advantage of the relatively low 4.51 percent rate that is currently in place.
"While the recent rise in interest rates will tamper the refinance loans, it will have little impact on purchases," comments AW Pickel III. "The greater certainty that Americans have in the future economy is a more telling guide with regard to purchasing mortgage loans. Americans want to buy homes. Even in 1981, when home loan fixed rates reached 18 percent, individuals and families still continued to buy. Overall, 4.51 percent is still a phenomenal value in an interest rate and would avail millions of Americans the opportunity to buy the home of their dreams."
The historical average in terms of mortgage rates is 6 percent, so 4.51 percent is quite low, despite the fact that the interest rate recently jumped by over one whole percentage point. This is why Pickel is confident in the fact that buyers will continue to invest in new homes despite this jump in the mortgage rate. AW Pickel III encourages anyone who is interested in purchasing a new home to talk to a mortgage professional about their options.
About:
AW Pickel III is the president and CEO at LeaderOne Financial Corporation, an organization that specializes in providing mortgages to its clientele. With a bachelor of science in accounting from the University of Illinois, Pickel serves as an expert witness for court cases and has been bestowed numerous honors for his work, including the designation of Kansas Broker of the Year in 1999 and NAMB Central Region Broker if the Year in 1996. Aside from his professional endeavors, Pickel is interested in living a healthy lifestyle, reading, entertaining, and flying.
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