Friday, July 12, 2013

Tampa Real Estate Hot Topic: Mortgage Rate Predictions for 2013


Last week we discussed the importance of understanding the effects that rising home prices have on mortgage rates and the buying power of consumers in the market to both buy and sell.  The recent mortgage rate activity has caught the attention of the nation, and of course our local Florida real estate market.   Since May 2013, the average rate on a 30-year mortgage rose from approximately 3.3% to 4.87% according to Freddie Mac.  Executive vice president of McCue Mortgage, Kim Neilson, states that the market hasn’t seen an increase of this magnitude in years.  Despite the recent jump, however, rates are expected to remain steady between 4-5% throughout the remainder of 2013. 

There are two main reasons for this situation on the market. Firstly, the Federal Reserve chairman Fred Bernanke indicated in mid-June that he might slow down the purchase of mortgage-backed bonds. These were designed to strengthen the secondary market for lenders and also to keep interest rates low.  Secondly, the improving economy is another cause for higher mortgage rates. 10-year U.S. treasury bills go hand-in-hand with home loan rates which explains the recent yield increase of almost 0.25%.

So what does this mean for potential SI Real Estate buyers and sellers?  Joanne Carroll, spokesman for the Home Builders Association of Connecticut, believes that the rising mortgage rate will not have a serious impact the on real estate market unless it passes the 6% mark.  In addition, she believes that this trend could ignite more activity amongst buyers who are mortgage worthy, sellers who need to get their homes in front of buyers, and in some cases investors who are planning to enter the market before the rates increase even more. 

What will the future look like for Tampa Bay investors?  Robert Bischoff, publisher of the Connecticut Bank Rate Recap, is expecting a significant rate increase over last week. However, he believes that the rising mortgage rates will not scare off potential home buyers because the conditions to invest are still remarkable.  Moreover, this increase could also boost the rates certificates of deposit and saving account which have been experiencing a setback in the past years.  Collectively, all of these factors are indicative of economic stability as we have come out of the darkness into the shining light of recovery.