Are you a first-time home buyer, or a current homeowner refinancing a mortgage? You may be well-positioned to take advantage of current mortgage rates. Since the beginning of the pandemic, the economic responses have caused significant changes to the housing market and interest rate trends. In fact, Freddie Mac reports that on 30-year fixed-rate mortgages, borrowers are securing an average rate of 3.55% and on 15-year fixed-rate mortgages, borrowers are seeing low rates of 2.73%. Historically, the typical average rates are more than double these price points.
Although the reopening of the economy and gradual improvement of the job market has influenced the rates to increase slightly in the past year, they are still at record lows. They may keep rising in 2022, when the current coronavirus wave plateaus in the next few months. As these trends are similar across the United States, including New England, it is important for home buyers and homeowners to look into their current home buying and borrowing options. At New England Federal Credit Union, our experts will assist you in understanding how the current market rates occurred, how these trends are likely to continue into the next year, and when and how to reap the benefits of low-interest rates.
Impact of the Economy on a Mortgage Loan in Vermont
The economy and economic responses were a determining factor in low mortgage rates for the past two years. In 2020, the economy faced many challenges brought on by the coronavirus pandemic. As a response, the Federal Reserve altered the federal funds rate, which pushed mortgage interest rates below 3%. Since the economy has steadily improved during 2021 and entering 2022, home buyers are acquiring greater spending power. In turn, the demand for purchasing houses and mortgages will increase; this will drive climbing mortgage interest rates.
Likewise, due to continuous supply and labor shortages from the pandemic, inflation is peaking across the nation. Since this is the case, the Federal Reserve has recently announced plans to adjust policies to combat it. These policies will most likely affect the mortgage interest rates in an upward manner. However, the projected increase should be steady and slow, rather than dramatic. If you wish to buy or refinance your home, it’s an ideal time to seek the guidance of a professional NEFCU mortgage loan officer. We will guide you on securing a mortgage loan in Vermont that meets your current and future needs, while taking advantage of the currently low mortgage rates.
Investors played a significant role in driving mortgage rates lower and maintaining these low rates during the pandemic. Specifically, they purchased more mortgage-backed securities.
When a borrower acquires a mortgage loan not backed by the federal government, entities such as FNMA (Fannie Mae) or FHLMC (Freddie Mac) may ensure the loan. The mortgage loans become mortgage-backed securities that investors can purchase. The prices of these securities influence mortgage rates, either driving them down or pushing them up.
When the economy declines or crashes, investors tend to make more purchases of mortgage-backed securities as they are safe investments. During the pandemic, there were large amounts of investments that maintained low mortgage rates. As the economy steadily comes back to life, fewer investments will become mortgage-backed securities. In effect, mortgage rates are set to increase.
The Housing Market
The housing market affects interest rates, according to the number of homes being offered and the number of homes being purchased. During the pandemic, safety procedures, supply chain, and land shortages all led to a decreased number of new builds. Furthermore, current homes are on the market at slower rates, contributing to increased prices for homes. Accordingly, fewer people purchase homes and fewer people demand mortgages. That pushes mortgage rates lower as per a simple supply and demand formula.
As purchasing power will increase in 2022, the demand and sale of houses should rise, despite further increasing prices and increasing mortgage rates. Correspondingly, this indicates that potential home buyers should be focusing on the current market rather than waiting. Our NEFCU mortgage loan officers can offer a mortgage loan in Vermont that will help you secure the home of your dreams. We will guide you through the entire process, ensuring that every portion of the mortgage process tailors to your specific needs and desires.
Personal Factors that Influence Mortgage Rates
Apart from powerful dynamics within the economy and market, home buyers may be personally affected by the pandemic. NEFCU will find the best mortgage loan in Vermont that works for your current and future financial situation. We provide mortgages with fair rates that will allow you to acquire your home without placing an undue burden upon yourself. Particularly, we will assess numerous variables that factor into your interest rate:
- Type of Mortgage: The total cost of housing, coupled with your current and future financial situation, may play a determining factor in the type of mortgage that suits your specific needs. A mortgage rate may be higher or lower, depending on the chosen type and its specifications.
- Loan Amount: Higher housing prices indicate higher loan amounts. Payments may be spread over a longer term, in order to keep monthly costs low. If borrowers can afford a higher monthly payment, they can enjoy a shorter-term agreement.
- Term: Amortization type will affect the interest throughout the duration of the term, a fixed interest rate will stay set with little to no variance, while an adjustable-rate or graduated payment will change after an initial fixed period. Further, the total amount of interest owed partially depends on the term length.
- Down Payment: A smaller down payment upon a home means you will be borrowing a larger amount of money, while a higher down payment means you are borrowing a smaller amount of money. Some types of mortgage loans will accept lower down payments if you meet the qualification requirements.
- Qualifications: There are various qualifying factors for different types of loans, including credit score, employment, and income history.
At New England Federal Credit Union, we can help you obtain a mortgage loan Vermont at an affordable rate. Connect with our NEFCU Vermont Mortgage Team today!