How many years have we been hearing that mortgage rates are going to go up? It’s been at least as far back as 6-8 years, when they hit record lows.
Well it finally seems that rates are starting to rise. In the first time in almost a year the 30 year fixed rates climbed above 4% last month. Obviously we are still talking extremely low interest rates from historical standards. The average annual fixed rate on a 30 year mortgage in 1981 was over 16%. But experts do agree that rates will continue to rise. In January a Fortune magazine article talked about the Feds concern over Trumps policies leading to increased interest rates. “…Yes, Fed members seemed convinced that Trump would push through some stimulus measures and that the economy would grow faster under Trump. But they also said Trump's policies increase the risk of higher inflation, and that if so, that would likely cause them to move faster in raising interest rates.” Fortune Experts agree that we will not see an extreme spike in rates but rather gradual increases which are predicted to be over 5% in 2018.
So what does this mean to the Outer Banks Real Estate market? If you’ve been receiving my newsletters over the past few years you know that although there have been bright spots, the OBX market continues to be sluggish. So the last thing we need are higher interest rates to lower buyer’s buying power. There is some encouragement however. Lenders are starting to better understand our market and provide products that cater to the Outer Banks Real estate market. Check out these terms from one of the preferred OBX lenders on their “OBX product”:
• This loan has a 5/1,7/1 or 10/1 ARM lock period available (studies show the average shelf life of a second home or investment mortgage is less than 7 yrs)
• Today the rate on a 5/1 ARM year is 3.375%, 7 year is around 3.5% and the 10 is 3.875% with no points (yes JUMBO)
• You can also borrow the money on a variable rate as low as 2.49% and then lock the rate at a later time
• This loan allows you to pay interest only OR any additional principle payments you would like monthly
• This loan allows you to pay down the principle when the vacation rents are coming in and the beauty of the product is it allows you to withdraw money from the loan as many times as you want for 10 years
• Each month the payment will recalculate based on any principle curtailment or if any advances have been taken
• Primary residence loans can go to 89% with no mortgage insurance
• Every $500,000 on an Interest Only Payment is roughly $757 less per month ($1,500,000 loan amount equals $2,271)
• Loan amounts from $250,000 to $3,000,000
Products like this are exciting for our market and may be what we need to help both new buyer as well as current homeowners who may want more flexibility with their mortgage. It may not be the price of your investment property that’s holding you back but rather the type of mortage that you have. The Outer Banks investment is evolving so it’s vital that buyers keep informed on the changes.
To discuss, please email or call 252-202-2573.