High Interest Rates and Low Mortgage Applications Are Good for Homebuyers – Here’s Why

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When it comes to buying a home, the market is so competitive that buying a home seems out of reach for many potential homeowners. Despite alarming interest rates and house prices, now may be the time for you to buy, simply because others are not.

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For the first time in seven years, the 30-year mortgage rate exceeded 5% in April and home prices jumped 19% between January 2021 and January 2022. In March, the median price of active home listings was $405,000 — the highest point ever. , according to Realtor.com.

The latest consumer price index hit 8.5%, the highest rate of price growth since December 1981. People are feeling the pinch at the grocery store, where the cost of meat, poultry, fish and eggs increased by almost 14% compared to last year. And at the gas pump, a gallon of unleaded is now over $5.

There is little upside to rising mortgage interest rates and runaway inflation, but the current economic situation may force lenders to ease their financing standards to attract more buyers. In other words, the current economic climate may provide opportunities for borrowers previously excluded from term financing. Refinancing and purchase requests are significantly lower than last year, for example.

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We could see lenders being much more lenient in approving larger loans, but borrowing more than you can afford is a dangerous game. Prospective buyers should always balance their existing debt, disposable income, and spending principles before signing a mortgage.

Opening up mortgage applications could also give those with lower credit scores the chance to get home loan approval. According to an analysis of federal mortgage data from Inside Mortgage Finance, Fannie Mae and Freddie Mac approved nearly 17% of loans for people with credit scores between 620 and 699 in the first quarter of this year. That’s a 9.4% increase from the first quarter of 2021. That being said, credit inquiries haven’t gotten too loose, according to MBA vice president Joel Kahn.

“Credit availability has gradually increased since mid-2021, but remains about 30% tighter than it was at the start of 2020,” Khan said in a credit availability report in March.

Regardless of volatile economic trends and a murky outlook for interest rates and housing prices, you might be able to borrow to your advantage and make home ownership a reality in 2022.

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This article originally appeared on GOBankingRates.com: High Interest Rates and Low Mortgage Applications Are Good for Homebuyers – Here’s Why

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