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Jan 20, 2016

Interest Rate Hike Creates A Surge In Mortgage Applications

Sponsored Content provided by Patrick Stoy - Mortgage Consultant/Owner, Market Consulting Mortgage

The power of the media to shape public opinion and exert influence on our national economy is something that never ceases to amaze me. When the Federal Open Market Committee voted to increase the funds rate that it uses to sway interest rates by a quarter point last month, I witnessed the effect of this phenomenon firsthand.

To put it simply, it has been extremely busy around here for the past month or so. Many of the calls have originated from people who have been actively shopping for a home. There also has been a large volume of calls from home owners seeking to refinance and lock in a great deal on a new loan while interest rates are still low.

If there’s a long-term side effect associated with wearing a Bluetooth earpiece that is connected to a smartphone, I could be in trouble. That is a bit off-topic, but the point is that the media has created a sense of urgency and people are recognizing that interest rates might not be this low again for many, many years.

The increase in the interest rate, which was the first of its kind in almost a decade, is just one factor that contributed to the recent surge in mortgage applications. Another is the number of homes sold in Wilmington, which has jumped by more than 12 percent since 2014, according to data published by the Wilmington Regional Association of Realtors (WRAR).

The median sale price for homes in greater Wilmington and the surrounding areas also has increased by more than 10 percent year-over-year, if you compare December 2014 to December 2015. This information also comes from a report by WRAR.

What’s happening? Home owners are realizing that the window of opportunity to cash out some equity and refinance at a lower interest rate could be closing. To a lesser extent, the surge in prices and sales also has created more interest among home buyers, as competition has increased and word-of-mouth about the heating up of the real estate market has spread.  

Another development that has spurred an increase in business for the mortgage industry has been the launch of the Fannie Mae HomeReady loan. For borrowers with a credit score above 680, it is a very cost-effective option. The Fannie Mae HomeReady loan allows for up to 97 percent of the purchase price of a home to be financed. It also provides an increased flexibility in terms of where the funds can come from for the down payment and closing costs, with no minimum contribution required from the borrower for one-unit properties.

As one of my Realtor friends is fond of saying when discussing the cyclical nature of the real estate market, “You never know you’re at the bottom until you’re on the way back up.” When prices climb, purchase power deteriorates, and missing out on a window of opportunity like this could create a tremendous sense of frustration.

For a confidential assessment about your purchasing power or a referral to a qualified local Realtor, please contact me at the number below.   

Patrick Stoy (NMLS Numbers 39527 and 39166) has 16 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit Patrick can be reached at [email protected] or (910) 509-7105.

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