In a recent interview with CBS17 in Raleigh, NC, our Founder and CEO, Phil Jawny, gave insight on the increasing interest rates and what this could mean for mortgage rates and housing affordability. We wanted to dive deeper into this to provide more clarity on the subject. We went straight to the source and asked Phil a few questions! 

How does the increase in the fed rate affect the housing market?

The recent action from the federal reserve hiking the fed fund rate should be viewed as a benefit to the housing market. The increase will have some short-term and long-term impacts. Short-term housing demand has slowed down, causing sellers to now negotiate. You don’t need large down payments or cash to purchase, as we saw over the last 24 months. Most importantly, you don’t need to compete against several other buyers who want the same house.

How does it affect the mortgage interest rates?

The mortgage rate is tied to inflation; the higher the inflation reading, the higher the mortgage rates. The federal reserve is committed to bringing inflation down. We see it and hear it all over the media. As I see it, mortgage rates will eventually come down with inflation.

What advice would you give someone looking to purchase a home right now?

Don’t be confused with home values or prices. Home values and prices are sustainable, and mortgage delinquencies are at an all-time low. There will not be a flood of homes into the marketplace, reducing pricing. Inventory levels are shallow, and when interest rates start to come down, you will compete with hundreds of buyers who are also waiting for interest rates to come down. My advice is to find a home you want today and work with a seller who is now willing to work with you as a buyer. Take advantage of the slowdown and get a competitive deal on your home purchase. Use the softness in the market to negotiate with the seller to pay for a rate buy-down. I would look at buying right now and using a 2-1 buy-down* to get the seller to pay for that 2-1 buy-down and take advantage of a significantly reduced interest rate for the first few years. This option will give you some breathing time to wait for rates to come down and refinance without having any type of payment subject to current higher market payments.

*A 2-1 buydown is a type of financing that lowers the interest rate on a mortgage for the first two years before it rises to the regular, permanent rate.

Bottom Line

• Find your team of trustworthy real estate and mortgage professionals. 
  • Fulfilling your homeownership dream, aka investing in your future, should be done with professional help. 
• Broaden your geographical search for your perfect home.
  • With a low home inventory, it’s wise to consider homes outside your initial desired location. You wouldn’t want to miss out on an incredible opportunity just a few miles from where you’ve been searching!
• If you are eligible for a VA loan, understand the options your benefits can provide.

GoVA Inc. began in 2019 when our CEO and founder, Phil Jawny realized he had the opportunity to give back to the military community. 

Our mission is simple; we are devoted to being a trusted and credible resource for all military community members.

You served for us. Let us work for you.