To put the rising rates into perspective, mortgage broker Michael Fick, president and CEO of Superior Home Lending LLC in Farmington Hills, said he began pricing out a loan for a potential client in early December. At the time, rates were below 3 percent, and have since jumped a full percent. That means it would cost the buyer around $150 more each month in a mortgage payment.
“That’s big,” Fick said, noting that it might cause some buyers to switch from a conventional mortgage to an FHA loan, which typically comes with a lower down payment.
A gauge of U.S. home loan applications fell last week to its lowest level since the end of 2019, indicating higher mortgage rates are becoming a greater headwind for the housing market.
The Mortgage Bankers Association’s index slumped 13.1 percent in the week ended Feb. 18 to 466.4, the Washington-based group said Wednesday.
But given demand for housing, some aren’t so sure that an uptick in interest rates will be the defining factor that deters would-be buyers who would need new mortgage loans.
Interest rates still remain at relative historic lows, according to the Federal Home Loan Mortgage Corp., commonly known as Freddie Mac, a publicly traded, government-sponsored enterprise.
“There’s an increase in monthly obligation to be sure,” Ross said. “(But) because these rates are historically low — what we would call ‘cheap money’ — I don’t see the rate holding many people out of the market.”
To that end, Carol Trowell, a real estate broker with DuPont & Associates in Detroit, said the reason buyers remain active as inventory stays low is clear: “The interest rates, the interest rates, the interest rates.”
“Who would have expected interest rates like what we have now?” she asked. “It’s crazy.”
Additionally, the relatively low interest rates mean potential buyers can get more home than they might have otherwise. It’s keeping them in the market before rates go up.
And Darralyn Bowers, a broker with Bowers Realty & Investments in Southfield, said her buyers are also looking to take advantage of low rates before they rise more.
“This is the time to buy as much house as you can,” she said. “It’s a window of opportunity.”