Rising interest rates could aid home buyers

6/23/2013

Mortgage rates are close to 4 percent, but in a strange twist, that could be good news for homebuyers.

Higher rates tend to dampen the fervor of investors who have been snapping up homes in many markets. That would give more typical homebuyers a better chance to get in the market.

“We don’t want an investor-driven marketplace,” said John Pinto, a California real estate agent. “We want an owner-occupied marketplace. With interest rates rising, for people that are first-time homebuyers, there will be more opportunities.”

But at a higher cost.

Freddie Mac announced Thursday that the rate for a traditional 30-year, fixed mortgage averaged 3.93 percent. Last week, a 30-year, fixed-rate mortgage averaged 3.98 percent — its highest level since April, 2012. A year ago, the same rate was 3.71 percent.

Mortgage brokers and Realtors are quick to point out that 30-year, fixed mortgage rates below 4 percent are still a relatively inexpensive way to finance a home.

But higher interest rates tend to dissuade investors who borrow to buy because the added expense can make a deal less profitable, whether they are looking to rent or turn over the house quickly.

The predicted pullback of investors is likely to cool off two of the most discouraging aspects of the current market for typical buyers: multiple offers, and buyers getting outbid, even when they offer more than the asking price.