Add this to all the other outcomes of the nation’s presidential election: Mortgage rate jitters.
The average interest on a 30-year fixed-rate loan bumped up to 4.03 percent last week, the highest since July 2015, according to mortgage giant Freddie Mac.
So far, local Realtors and mortgage brokers say, rising rates have caused a few worried inquiries from potential home buyers, and may have knocked some homeowners out of contention to refinance loans.
But rising rates likely won’t hurt a market distinguished by a dearth of homes for sale.
In fact, rising interest rates might spur consumers who had been looking for a home to speed up purchases, in case rates go up even more, said Kris Koliss, president of the Central Massachusetts Association of Realtors.
“I think it absolutely will move people who perhaps were moving a little slower,” Ms. Koliss said. “The problem is, there still isn’t a lot of inventory.”
Mortgage interest rates generally follow the bond markets. When bond prices fall, the rate of return that investors demand, also known as yield, goes up.
Since the presidential election Nov. 8, investors have dumped bonds over expectations that inflation lies ahead. Inflation erodes the value of bonds.
As bond prices have gone down, the yield on the benchmark 10-year U.S. Treasury bond climbed last week to 2.355 percent, up from 1.867 percent on Election Day.
When mortgage rates increase, borrowing becomes more expensive. That can impact the housing market, according to Thomas R. Gleason, executive director emeritus of MassHousing, a quasi-public agency that raises money for affordable housing development in Massachusetts.
“What you get on the housing side is at some point the steady appreciation of home prices that we’ve seen over the last several years will stall out because interest rates are going up too far too fast, and the rise of interest rates is making it more difficult for people to qualify for mortgages,” he said.
Yet, if anything, borrowing is increasing. MassHousing’s own mortgage program for consumers in the current fiscal year is outpacing levels from last year, in both dollar volume and numbers of mortgages.
Nationally, U.S. mortgage loan volume jumped 5.5 percent during the week ended Nov. 18 compared to the previous week, according to the Mortgage Bankers Association.
“For the near term, fence straddlers may decide to refinance their mortgage before rates climb much higher. That could spur refi (refinancing) activity for a few months,” said Chris Ling, head of home buying and mortgages at NerdWallet, a consumer finance website. “And would-be home buyers might decide to pull the trigger on a purchase a little sooner than they had expected.”
Still, some area brokers and Realtors suggested that consumers are borrowing not because they expect rates to go up, but because they feel good about their own financial situation.
“What affects borrowers more is how safe they feel in their job,” said Michael A. Dell’Ovo, a Charlton loan originator and Local Realty Pro real estate broker. “That’s what I’m finding now.”
Rates also remain low compared to historical averages. A decade ago, the average mortgage rate was 6.24 percent, according to Freddie Mac data.
“I don’t see it as an issue right now,” said Priscilla Romasco Kryger, a Realtor for 17 years in the Blackstone Valley. “I bought my house in 1980. It was 14.5 percent then. …. Even if (rates) were 5 percent, that’s still low.”
Homeowners seeking to refinance their mortgages may prove most sensitive to interest rate changes immediately. Brian M. Moore, vice president of Fairway Independent Mortgage in Holden, said some homeowners have been refinancing to pull equity from their homes and raise cash, while others are looking to lower their borrowing costs.
“As the interest rates start to move up a little bit, it doesn’t make sense for a lot of people to refinance,” he said.
