ORANGE COUNTY, Fla. – The Federal Reserve plans to reverse pandemic-era policies to curb high inflation.
Lower interest rates have been used to incentivize consumers as they battled the coronavirus.
“Over the course of the pandemic we had the lowest mortgage interest rates we’ve seen really in modern history,” Zillow economist Nicole Bachaud said.
Now that the market is stabilizing those rates are expected to change this year. Consumers can expect interest rate hikes in March.
Bachaud said the higher rates will be added pressure on potential home buyers.
“The reason that a lot of the recent rapid increase in home prices have been able to be absorbed by consumers is because of low interest rates,” Bachaud said. “Now that interest rates are starting to rise [that is] really going to limit a lot of people’s ability to afford certain types of homes or afford homes in general.”
The housing market is already posing challenges for buyers because of rapidly rising home prices.
Now, the monthly payment on a mortgage will become more expensive. Bachaud is urging consumers interested in closing on a home to act quickly.
“Be ready to go to buy a home now you know if you’re wanting to get in now this is for the foreseeable future the most affordable time to buy a house is now,” she said.
She said interest rates are sitting at around 3.5% currently, adding the last two years the rates were at or under 3%.
Bachaud predicts increased rates may trigger higher demand in the housing market for the next couple of months.
Adding, many people may settle into the rental market until they are able to move into homeownership.
Real estate consultant, Shaun Reed, said purchasing a home is a better investment, if possible.
Renters are more vulnerable to rent increases based on the market.
“Rent is going to go up as well, so why not take that jump and look into homeownership,” Reed said. “If you can and [it is] a better opportunity for you and your future, 100% do it.
Experts advise potential home buyers to prepare for increased interest rates by paying off bills to improve credit, get pre-qualified for a loan and work with trusted real estate agents.