Impact of Rising Interest Rates on Mortgage Plans

The Concern Around Increasing Mortgage Rates

The recent and rapid increase in interest rates has certainly created concern. While the 11 increases in the Fed Benchmark Rate since the Fed began its inflation fight in March 2022 do not have a direct impact on mortgage rates, 11 straight rate increases currently the top story all over the media does shock the market. Mortgage rates have increased from a low of 2.96% in 2021 to an average mortgage rate close to 7% in 2023 creating concern for prospective buyers.

Understanding the 30-Year Mortgage Misconception

Why pay 7% for 30-Years? It is true the 30-year mortgage is the most popular term for a mortgage in the United States, representing over 70% of all mortgages, but do borrowers really have a mortgage for 30-years? The initial thought of most borrowers is wow, I will have an interest rate of 7% for 30-years. While most borrowers think this is a 30-year commitment the reality is quite different.

The Evolution of the 30-Year Mortgage

Decades ago a 30-year mortgage was a simple 30-Year Loan. Refinances were not an option.

Today’s financial markets are very different. A mortgage is a financial tool that changes based on the financial needs of the borrower. In 2023 mortgage rates are much higher than 2 years ago, but you are not paying for 30-Years. The average homeowner length of loan is 7 years or less. Today’s mortgage rates are not the interest rate a borrower will pay over the life of the loan. When mortgage rates improve, and they will, FDM can refinance your loan for free.

Mortgage Planning: A Smarter Approach

Ask your FDM Mortgage Professional how Mortgage Planning can help you maximize your cash flow aligning the right mortgage program with your financial needs. Asking about the lowest rates is not always the right question. Asking what mortgage program meets your current needs is more important. What mortgage program you start with is not the mortgage program you will have forever.

Contact Our Lending Partner

To discuss your mortgage needs and understand the best strategies in the current market, reach out to our trusted lending partner, Ellen Wilson. She Has the expertise to guide you through these fluctuating times.