Mortgage Bankers Expect Sellers’ Market in 2016 Despite Possible Rate Hike

By September 15, 2015News, Uncategorized

Lately, the news media has been talking about a possible mortgage rate hike that could discourage homebuyers. The Federal Reserve may decide to raise rates before the end of 2015. Fortunately, a new study reveals that home sales will probably remain brisk despite this change.

Interest Impact

Although lower loan rates produce significant savings for buyers, they don’t actually cause real estate sales to skyrocket. A New York Federal Reserve Bank study illustrated this fact by calculating the effect of a slightly higher rate.

The FRB economists carried out a survey of potential homebuyers. They found that Americans only become 5 percent less likely to buy homes if they have to pay more interest. The survey instructed people to think about mortgages with fixed rates and 30-year terms when they answered the questions.

Down Payments

This study’s results also show that people are much more inclined to purchase real estate if they don’t need to save up huge down payments. These findings make sense. We know from experience that it’s far easier for buyers to pay somewhat higher interest rates than to set aside $30,000 or $40,000.

The survey asked people if they were more willing to purchase homes if the minimum down payment was 5 percent rather than 20 percent. Two out of five renters said this would make them more inclined to buy. It also boosted current homeowners’ willingness to move.

Basically, a possible rate hike holds much less importance than the ongoing trend toward lower upfront costs. Some lenders have cut minimum down payments to as little as 3 percent. This will help to ensure that a sellers’ market persists well into 2016.