Is Tampa Bay worried over the Feds decision of future interest rates for mortgage borrowers? Applications for new mortgages slipped by 7% last week according to the mortgage bank association. The industry group reported 4.2% fall in applications new home purchases which is less rate sensitive. Last week fixed 30 yr mortgage rate down 1 basis point versus that previous week. It seems anxiety is building with investors ahead of the Thursdays announcement.
First let's start by saying mortgage rates are not set by the Feds! So if the Feds spike their rates by a quarter point that does not mean the average rate on the 30 yr fixed suddenly jumps a quarter point. Mortgage rates are actually a compilation of several factors, part of it is Federal related of course but part of it includes demands from mortgage backed securities and mostly rates follow the yield on the 10 year treasury. Now that yield could be effected by the Fed move but in the past few years it's been much more sensitive to economics conditions overseas and recently with Chinese investors buying treasuries. So when more people buy treasuries the yield goes down the rates follow.
So let's take a look at where we are today... rates began rising this spring not by a ton and home sales actually improved at the same time. Maybe the rise got some folks off the fence but did that rise really hurt affordability? Not so much, you take a $300,000 home for sale in the Tampa Bay area with principal and interest on a 30 yr fixed at 3.9% = $1,415.00 with where we are today pump that rate up to 4.5% = $1,534.00 that is $119.00 more a month. So you tell us if that's going to change your decision to buy a house or not? Bottom line the Feds raising the rates is indicative of a stronger economy and a stronger economy is the best thing for housing.