Mortgage Rate Drop Gives Rise to Credit Union Substitution of Financial : Effect of Rate Rise on Purchasing Power


Mortgage Rate Drop Gives Rise to Credit Union Substitution of Financial

For every one percentage point increase in mortgage rates, a buyer’s maximum home purchase price falls by approximately 11 percent.

“Any time mortgage rates go up, it will affect buyers’ purchasing power, especially first-time buyers”, said Andy Emery, president of the RealSource Board of Realtors in Waldwick and a Coldwell Banker agent in Ridgewood.

Fixed mortgage rates increased for the week ending November 12 amid continued market expectations of a possible rate increase by the Federal Reserve and following a stronger-than-expected jobs report, according to Freddie Mac’s latest Primary Mortgage Market Survey.

The 15-year fixed-rate mortgage averaged 3.20 percent this week, up from 3.09 percent in the prior week. The report says that a year ago sellers cited the fear of rising home prices and interest rates as a prime motivator for selling their home and buying another.

Refinance applications, which are highly rate-sensitive, fell 2 percent from the previous week, seasonally adjusted, but are 4 percent higher than one year ago, when rates were slightly lower.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. A year ago at this time, the 15-year FRM averaged 3.20%. According to their forecast, the average rate for a 30-year home loan will hit 4% between now and the end of 2015. This past quarter of 2015, credit unions seem to be substituting traditional financial lending institutions such as commercial and investment banks in provision of home loans and mortgages. “Janet Yellen referred to a December rate hike as a “live possibility” if incoming information supports it. The October jobs report to be released this Friday will be one crucial factor influencing the [Federal Reserve’s] decision”.


Prediction: Mortgage Rates Above 4% by the End of 2015?


It’s been a tough two weeks for mortgage rate shoppers. But these predictions are still only guesses. This week the panelists are mixed with 45% predicting mortgage rates to increase further and 45% expecting mortgage rates will remain more or less unchanged over the next week. This is because, when mortgage rates climb, a buyer is restricted to a smaller mortgage for the same monthly payment.


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