I remember living in Maryland when mortgage rates hit the double digits. My family was stuck in a tiny ranch starter home in the country that would have been more suitable for a childless or retired couple rather than a family of six. Real estate experts say homebuyers were recently blindsided by the biggest interest rate hike in more than 26 years. Although I understand how mortgage shoppers could feel a sense of panic as interest rates rise, I believe rates are only going to go higher. And, it's hard to help my teenage children, who may want to purchase homes in their 20s, understand that the mortgage rates between 4.5 and 8 percent aren't unusual. In fact any mortgage rate below 7 percent used to be considered awesome.
According to a recent article by CNN Money, mortgage rates are rising at a record rate. It's becoming a scary time for mortgage shoppers. While people in my extended family are in different situations when it comes to their homes, each individual plans to hold onto their properties as mortgage rates rise. According to a Forbes article, home prices have historically risen in time periods during which mortgage interest rates rise.
Refinancing and settling down
My husband and I prepared for the rising interest rates by refinancing at the historic low levels. We had to make a decision about whether we planned to move in the next 5 to 10 years or if we were ready to commit to settling down in our house for the long-term. We landed a low rate of 2.75 percent on a 15-year fixed mortgage.
Keeping a snowbird nest
One of the grandfathers in our family owns a small house just around the corner from our home that he uses as his winter home. He didn't have a chance to refinance at a lower interest rate, but his mortgage payment is low enough that we could take it over if he ever had a rehabilitating health problem. His two homes are appreciating in value due to the upswing in the housing market.
Holding onto a rental property
One of my siblings turned the home she owned into a rental property when she decided to move across the country. Her decision turned out to be an excellent one since her home has gone up in value by more than 20 percent in the past year. By resisting the urge to sell and take a quick profit, she will probably come out ahead. If interest rates return to the double digits, she may decide to move back into her home. In a few years, her property may be worth significantly more if inflation pushes up home prices.
As for my children, they may be afraid to purchase a home if interest rates get too high. The real issue is the fact that people in my generation and older have a different definition of what's "too high" for mortgage rates. My sons are scared of taking out a mortgage with an interest rate above 5 percent, but their grandfather didn't even bother to refinance because he felt 6 percent was low enough. Since my sons have time, they plan to save cash for their eventual home purchase. If they are lucky enough to make an all-cash home purchase, they may only have to fear the listing price not the mortgage rate.
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