Buyers hoping to purchase the perfect home, or homeowners wishing to refinance on their fixed-rate mortgage, better hurry if they'd like to take advantage of record-low mortgage rates.
…At least that's what new retail sales statistics indicate!
Interest rates are already below 4%, and the Federal Reserve announced last month that they plan to keep it that way until at least 2015.
In order to keep it that way, the central bank is purchasing $40 billion in mortgage-backed securities each month. The hope is that those purchases will help keep interest rates lower and mortgages more accessible and affordable.
But, that could all be affected by new reports that retail sales are higher than expected.
Here's how the numbers play out:
September retail sales were 1.1% higher than they were in August. That may not seem like much, but financial analysts had only projected a 0.7% increase. And, in this economy, any higher-than-projected increase is a good one!
Automobile sales continue to be among the industries that show improvement each month, which is particularly impressive, considering it has been a volatile business in recent years.
Electronics, building supplies, and the food and beverage industries continue to also show improvement in sales.
So what does all this have to do with the housing market, and affordable mortgage rates?
Quite a bit actually.
Here's how it all affects your mortgage rates:
Since the September retail sales statistics were released last week, many mortgage lenders have slightly increased the interest rates they are charging for a 30-year, conventional, fixed-rate mortgage.
Because the retail sales statistics are one of the tools that banks use to get a pulse of the economy. If the American people are buying more things, it can be assumed that the economy is improving. After all, people can't spend more money if the economy is completely terrible, right?
The banks see the boost in retail sales as a boost in demand (in this case, a demand for new things in general, including new houses). And, mortgage lenders -- just like any other business -- live and die by supply and demand. The higher the demand for their product, the more they can charge for it.
Of course, after what the housing market has been through in the past few years, mortgage rates aren’t going to go too high too soon.
After all, lenders know all too well what can happen when people get a mortgage they can't afford. Today's foreclosures, short sales, bankruptcies, and defaulted loans are all the results of years' worth of sub-prime lending. Since the housing collapse in 2008, lenders have avoided giving sub-prime loans, instead only approving mortgages for those individuals and families that can afford them.
As a result to boost home sales, interest rates have been very low ever since.
But you can bet, if the economy continues to improve, more Americans have money to spend, and they choose to spend that money on a new home, the financial institutions will slightly raise the interest rates in hopes of making more money.
And there's one very important thing to remember.
Since we know that retail sales statistics affect mortgage interest rates, the time to buy or refinance is now. After all, once holiday shopping hits full swing -- and retail numbers go up even more -- mortgage rates may climb a little bit higher, at least through the first of the year.
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