Yesterday, the Wall Street Journal published an article with the headline, “Mortgage Rates Top 6% for the First Time Since the 2008 Financial Crisis.”
Whether consumers read the entire article or not, they will become hyper-fixated on those last three words of the headline:
2008 Financial Crisis
It’s a phrase that makes just about everyone freeze out of fear. But comparing this market to 2008 doesn’t capture the whole picture.
Mortgage Rate Increase
Mortgage rates jumped up once again this week, this time above 6% for a 30-year fixed mortgage rate. This is an increase from the 5.89% interest rate last week and 2.86% from a year ago.
The increase in mortgage rates comes as the Federal Reserve works to curb inflation, as prices continue to rise quickly.
There’s no denying that rising mortgage rates have an impact on buyers. With rates more than double compared to a year ago, higher interest adds hundreds of dollars to monthly housing payments. In turn, some buyers are hitting a financial burden and putting their home search on hold. Others are cutting back on other expenses to make monthly payments.
However, motivated buyers do have some benefits in today’s market. More negotiating power, more inventory, and more days on market give them a break from the ultra-competitive market of the past two years.
Mortgage Rate Projections
Here’s an important piece to the story about mortgage rates—even though rates shot up this week, economists don’t expect them to stay above 6%.
Freddie Mac, Fannie Mae, MBA, and NAR released their rate projections for the upcoming year, and most believe rates will be closer to 5%.
While rates are volatile right now, if projections are correct, they will stabilize at a lower rate over the next four quarters.
The message agents need to deliver
Consumers will continue to see headlines like the one WSJ put out this week. They will cling to phrases like ‘2008 financial crisis’ because those are the phrases that elicit an emotional response.
While consumers sit in fear, they likely don’t know that economists don’t expect rates to continue rocketing.
And it’s up to you to deliver the message.
The reality is, this is probably just a storm that we are moving through. Everyone is looking at these rates settling back down to 5% or lower in some cases. That’s the message we need to over-deliver on, because if all consumers focus on is 2008, they are going to back down out of fear.