Mortgage Talk with Frank Merola - Welcome to 2018 Mortgage Rates

New column on real estate mortgage topics
Frank Merola is Executive Mortgage Banker for William Raveis Mortgage LLC.

For quite some time now a 30-year fixed rate mortgage has begun with the number 3. Welcome to 2018 as recently rates for home loans have risen to their highest level in more than a year. As of February 8th, 2018, we have seen mortgage rates rise for five consecutive weeks.

Mortgage rates closely follow the yield on the 10-year US Treasuries. All of a sudden, this investment has become somewhat unattractive as inflation has picked up. A strong US Economy is raising fears that inflation will continue to increase and investors will demand higher interest rates.

Simply put, bond yields rise as prices decline, and vice versa.

Higher interest rates could mean that some borrowers have their eligibility ceiling lowered. Higher rates will also increase the cost of home ownership. What is yet to be seen is whether these rising rates will stall the currently strong housing market.

Here is how rising rates may affect your wallet; for every .25% increase in the rate, it ends up costing you an additional $9,518 in interest payments over the life of a 30-year loan. If you borrow $300,000 at 4.0% your principle and interest payment would be $1432.24. If your rate goes up to 4.5% your payment goes up to $1520.05

Options to get a lower rate are to choose a 5- or 7-year adjustable rate mortgage (ARM), these typically come with lower rates and payments for the first five or seven years. Or a borrower can choose to pay the lender “points” towards buying their rate down to a lower level.

In addition to higher mortgage interest rates, the Prime Rate has increased over the past year as well. This has meant an increase in the cost of borrowing for things like student loans, auto loans and credit card interest rates.

So the question right now is how much further will rates go up? Keep tuning in.

Frank Merola

Executive Mortgage Banker

NMLS Mortgage Loan Originator ID: 1020051

William Raveis Mortgage LLC NMLS ID #2630

Cell 508-740-5922

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