Current Mortgage Info for First & Second Homes
/Dan Hubrich of Mountain View Mortgage is back and this month he’s talking about current interest rates and also about the market for second homes and investors.
I want to talk about 2 important topics this month. Interest rates and 2nd homes/investment properties.
First interest rates. They are climbing! But before you start to stress let’s discuss what’s really happening. Rates hit an all time low a couple of months ago. They are now about ½ point higher than that. So yes they are up in the short term but they are still at an ALL TIME LOW if you just rewind a few months. So in other words, it’s all relative. They are still incredibly low and borrowing money right now is very cheap. There are a lot of forces that move interest rates but the main story behind the current bump is inflation. As most people know, the government has been printing trillions of dollars over the past year to help bolster and recover the economy due to Covid. While that’s a great short term solution to a big problem, Wallstreet is worried that all that money is going to eventually translate into inflation so that’s why rates have spiked up recently. The markets are always forward thinking though. They move based on what they assume is going to happen. Then when that “something” actually happens or doesn’t happen, the markets will adjust accordingly. If we get news in the coming months that inflation is indeed going up, then most likely rates will remain the same since they’ve already “baked that into the cake”. However if we find out that inflation isn’t as bad as what people are thinking, then they may actually come down again.
Now onto 2nd homes and investment properties. I’ve got good and bad news on this one. Generally speaking, these types of loans are riskier to lenders than owner occupied loans and they have a higher default rate. It makes sense. If you’re struggling, you’ll make your own house payment first and then the “other” house payment later if you have the funds. The talk on the street is that Fannie Mae and Freddie Mac got spooked this past year with rising defaults and with so many loans that went into forbearance. So they recently announced that they want to cut their portfolio way back on these types of loans. Starting April 1st we are anticipating seeing higher rates and fees for those types of loans. Bad news for investors but this is actually good news for owner occupied buyers since competition is already so fierce in the market. Fewer investors making offers on the home that you want to live in will help reduce the competition a bit. Reach out anytime with any questions and I’d love to chat!