So you're planning on buying a new home, but you're going to wait until the New Year to do so? In the meantime, you noticed one of the electronics stores had a great Black Friday sale on big screen TVs that would look great in your new living room. Did you ever think that by saving on the big screen TV, it might raise the interest rate on the home you hope to buy?
While the two many not seem connected, economists say that an increase in retail spending can actually raise home mortgage interest rates. And since retail stores are reporting record-high sales this holiday season, the time to lock in a low mortgage rate is now! In an effort to attract more consumers to their stores, retailers across the country made holiday shopping more convenient over the Thanksgiving weekend, and the result was record spending. According to the research firm BIGinsight, a record 247 million shoppers visited stores and websites over the four-day weekend, spending an estimated $59.1 billion. That's up 12.8% from 2011. The National Retail Federation (NRF) cites many reasons for the increase -- stores opening on Thanksgiving night, stores updating mobile shopping applications for smartphones and tablets, and providing more layaway and shipping options. The NRF says that retail stores make 40% of their annual sales in November and December alone, and they estimate that Americans will spend $586.1 billion during those two months this year.
What will a mortgage lender ask you?
But how does that affect your mortgage rate? Holiday shopping doesn't single-handedly affect the mortgage industry, but it does play a role in how interest rates are calculated. It's estimated that consumer spending accounts for 70% of the U.S. economy, and we've already established that a large portion of that money is spent during the months of November and December. Strong holiday spending numbers, especially during the Thanksgiving weekend, will boost the economy, and when that happens, interest rates go up.
What will home loan rates look like in 2013?
Why? More spending indicates that the economy is recovering, meaning that more Americans have flexible income to spend. Or, at least that's how banks, lenders, and the Federal Reserve interpret it. Their approach is, if retailers are getting more of our money, so should they! So what does this mean if you're currently shopping for a new home? You should probably try to purchase a home sooner rather than later, and the same is true if you're hoping to refinance the mortgage on your current home. In addition to an increase in retail spending, other factors affect mortgage rates, and they don't look too promising either. Newly-released housing statistics show a higher increase in existing home sales and new home construction than were originally anticipated. Housing creates jobs, and when that happens, Wall Street reacts by bidding up stocks and selling off bonds. Also, the uncertainty of the European Union (EU) has helped the economy in the United States slowly recover since 2010, but now the Eurozone is extending aid to Greece. If Greece and other countries get back on track financially, it could strengthen the EU, spelling disaster for the U.S. So what does all this mean? Simply put, home mortgage rates are going to increase in 2013. While that is mostly out of the hands of consumers, it's a reality that prospective buyers will have to live with. But at least that big screen TV you purchased on Black Friday will help take your mind of your mortgage rate for awhile!
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