The average 30-year fixed-rate mortgage is hovering around 4.16 percent, while the Federal Reserve has raised the federal funds rate for the first time in a year, and only the second time this decade. How does this affect homebuyers? Redfin predicts that rates won’t average above 4.3 percent in 2017.
But what if rates were to continue to rise? Very few homebuyers would stop their search, according to a recent Redfin-commissioned survey of people planning to buy a home in the next year. When asked “If mortgage rates were to rise above the current 4 percent, what effect would it have on your home-buying plans?” only 2.6 percent of respondents said they’d cancel their search.
One in four buyers said the increase would have no impact on their plans. Others said the rise would affect their plans, but they wouldn’t give up: 22.6 percent said they’d look in other areas or buy a smaller home to account for rising payments, while 23.8 percent said they’d increase their urgency to buy before further increases. Lastly, 25.8 percent said they’d slow down their search, to see if rates would decrease.
Why are homebuyers so resilient? While there’s no definitive answer, often homebuyers are searching for a new home because of a major life event, such as a birth or a marriage or a job relocation, which can’t easily be timed to the market — but which still motivates a purchase along its own timeline.
And while rates have climbed, they’re still historically low, which many homebuyers realize.