For the first time since 2011, mortgage rates rise above 5 percent, and many say this signals the end of an era of low rates and the beginning of a decline in home loan applications.
What does the mortgage rate increase really mean for the homebuyer and how does could it affect the housing market?
Like a domino effect, the rising rates may turn off some buyers –namely investors. Even all-cash buyers that eventually refinance into a mortgage to benefit their cash flow will have second thoughts now that rates have increased.
Also, buyers that are right at the edge of qualifying, such as Millennials, may now be out of the running as the rate increase also affects the debt-to-income guidelines for home loan qualification.
However, it’s not all bad news. The housing market has hardly been able to keep up with the demand for housing. With investors and low-qualifying applicants out of the market, more properties will be available for first-time buyers potentially increasing first-time buyer mortgage applicants.