What happens when mortgage rates rise? What are the long-term effects on homeowners and the housing market? Mortgage loan rates are at an all-time low but they can’t stay that way forever. And usual, providing personal finance advice, real estate advice and consumer advice on the Ilyce Glink Show on November 25, 2012 at 12:00pm Eastern Time on WSB Radio.
I hope everyone had a Happy Thanksgiving! You may be pleased to know that the Ilyce Glink turkey recipe came through in spades. Everyone in my family was really thrilled. They like the bird the same way year in, year out, which makes things easy for me.
It’s hard to believe but we’re getting ready to begin the last month of the year. I wanted to talk about mortgage interest rates today, but something we haven’t discussed yet is the connection between super low mortgage loan rates now and what’s going to happen to homeowners and the housing market in five to seven years when rates go back up.
I don’t predict hyperinflation like I’ve seen many other people discuss. We know that the Federal Reserve has committed to keeping mortgage loan interest rates low through at least the middle of 2014. But what you may not realize is that when you start locking in all-time low mortgage loan rates, in fact the lowest in the world, when they start to climb back up, you will see long-term effects on labor mobility.
What is labor mobility? That is homeowners’ collective ability to move to take a job. Let’s say you get a better job offer in another state with a ten percent salary bump. You’ll need to sell your home and if you decide to buy again, your mortgage loan rate will be higher. Even with a ten percent raise, your housing costs alone could go up ten to 20 percent.
So what happens when mortgage rates rise? It could be bad, locked up news for the housing market.
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