Rising mortgage rates are prompting some renters to jump off the fence and consider buying a home, so they don’t miss out.
Mortgage rates have seen a sharp rise in recent weeks. Mortgage applications for home purchases have risen 3 percent and are up 14 percent over year-ago levels, according to the Mortgage Bankers Association.
Fed Chairman Ben Bernanke recently suggested that the Fed’s efforts to keep mortgage rates at record lows may be nearing an end soon.
“It’s amazing to see the frenzied pick-up in home buying, as renters get nervous that both home prices and rates will rise quickly,” Craig Strent, CEO of Maryland-based Apex Home Loans, told CNBC. “They are trying to catch the beginning of the curve here.”
The 30-year fixed-rate mortgage — the most popular among home buyers — recently ticked up to 3.90 percent, the highest level in a year. Coupled with rising mortgage rates, home prices have been on the rise too.
Every 1 percentage point that mortgage rates rise reduces the average home shopper’s maximum purchase price by 11 percent, according to Dan Green, a loan officer with Waterstone Mortgage in Cincinnati.
Still, mortgage rates are low by historical standards, and remain below the 4 percent historical low threshold. The 30-year fixed-rate mortgage reached a record low in December last year — averaging 3.47 percent.
Source: “Rising mortgage rates could dissuade new home buyers,” CNBC.com