Mortgage Rates as of Feb 20th, 2022. Seattle, WA
For a 30 year fixed mortgage, the average rate increased 20 basis points to 4.19%, compared to just a week ago. To refinance your current loan, the average rate for a 30-year fixed refi rose to 4.20%, which was an increase of 18 basis points for the last 7 days. As far as national averages, a 15-year refi rate is 3.45%, which is up 15 basis points from a just one week ago.
So what does this mean?
We may see a plateau in buying power for a short minute, which isn’t necessarily a bad thing. The rate at home value increases has been quite dramatic, and has priced some buyers out of the market. If we continued that trend, less of the middle-class will be able to purchase a home. So, it’s okay. Home prices can’t keep spiking so rapidly otherwise it could be a recipe for a huge fall. Now, you’re probably wondering why this is happening.
As of February 18th, Big News around the world with Central Banks and QT
Investors brace for central banks’ retreat from bond markets. The biggest buyers in bond markets are now poised to become sellers, as central banks who purchased trillions of dollars of debt since the 2008 financial crisis start trimming their vast portfolios.
The looming tightening of monetary policy marks a stark contrast to the coronavirus response measures implemented in early 2020, when central banks around the world cut borrowing costs to historic lows and launched the type of large-scale asset purchase schemes that were used to arrest the global financial crisis a decade earlier.
“Central bank balance sheets will shrink in aggregate in size for the first time in history,” said Ralf Preusser, global head of rates research at Bank of America. “Some central banks may also experiment with (actively selling bonds) where we also have no experience.”
The Federal Reserve will probably begin the QT process later this year, investors say. It may offer more details of plans to wind down its $9 trillion balance sheet at its meeting next month, at which it is widely expected to raise interest rates for the first time since the start of the pandemic.
What is QT? Quantitative Tightening
Quantitative Tightening is a monetary policy that increased interest rates and reduced the money supply in circulation by retiring some of the Fed’s debt holdings. After qualitative easing expanded the money supply for several years to bring the economy back on track, the Fed used qualitative tightening as a means to normalize its balance sheet.
If you are new to home finance, mortgage rates adjust every day. With the problematic ‘era’ of Covid, the Fed kept rates low despite many talks they were going to raise them at one point or another during both the Trump Presidency and the Covid Pandemic. It’s no surprise the rates kept low with Donald Trump in office, as he had such a successful Presidency in keeping the economy humming.
With Biden in office, times have changed. The US has been printing money faster than a Randy Johnson fastball, and we’re now dealing with inflation. Top that with approximately 1 million homes still in an active Covid forbearance, and the Central Banks, and we’ve got some rising rates to help compensate for the mess.
Should you still buy a home?
The only one who can determine that is you. If you rent, you’re throwing your money away. So, if you can swing it without paying a much higher payment on a mortgage compared to rent, owning a home is always better than making your landlord rich.
When thinking about buying a home, no matter what the economic factors are, you should always consider:
- How long you’ll stay in the home
- Job stability
- Your current (and future) financial situation
Factors that determine your payment:
- Credit score
- Down payment
- Loan-to-value ratio
- Debt-to-income ratio
These all affect the interest rate and how much your payment will ultimately be. When you have a better credit score, coupled with a larger down payment, a low DTI (Debt to Income Ratio), a low LTV, (Loan to Value Ratio), or any combination of those factors will help you get a lower interest rate. That will translate into how much purchase power you have, in other words: How much home you can buy.
In the Seattle area and thinking about Buying or Selling?
Call 425-343-7581 and talk to a Top Real Estate Specialist
Debra Teal Real Estate Broker | Seattle, WA | Coldwell Banker Danforth
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Disclaimer: This article shall be deemed reliable but cannot guaranteed, and is not intended as legal advice. Individual results may vary.
Debra Teal | Seattle Real Estate Link 