What’s Going On With Mortgage Rates?

“What is going on with rates and what are my options?”

Sound familiar?  You are not alone.  The last time conforming fixed rates increased at this dramatic rate was in 1979.  Today’s 30-year conventional fixed mortgage rate is 6% or higher in some places, which hasn’t been seen since 2008.  Home buyers have been making offers on homes site unseen and for thousands over asking price.  We have been hit with record breaking inflation and gas prices, supply chain issues, the Great Resignation, computer chip shortages, and more.  It is easy to see how it may appear doom and gloom for the housing industry.     

Time to dust off those ARMs – Adjustable Rate Mortgages to the rescue.  For years ARMs had taken a back seat to conforming fixed loans.  The fixed loan option was the clear choice with rates being at or below 3% on a 30-year.  Who wouldn’t take it?  Now that those rates are gone, buyers are choosing ARMs over fixed financing for their initial low-rate offerings.  Many institutions have expanded their ARM products to include 3, 5, 7 and even 10 year fixed terms.  ARMs are not for everyone, so lenders need to take extra time to explain how they work and the pros and cons to ensure the buyer is taking the right product for them.    

Home sales may continue to slow for the foreseeable future, but with rents increasing, home ownership is still extremely desirable, and demand remains high.  Lenders will need to stay in constant communication with their buyers and realtors to make sure their buyer’s offer is the most desirable to the seller.   Innovation, communication, and ability to act quickly will be the keys to success.