Mortgage rates have recently been seeing higher upticks, indicating a steady economic recovery. Last week (from 15 to 21 February), the rates took the biggest leap in more than a year. According to Bankrate data, the 30-year fixed-rate mortgage reached 3.04% on 22 February, which was 2.8% on 10 February.

Mortgage rates are still near record lows, but the continuous growth could trigger some trends that may not be positive for the housing market, especially for the consumers.

The receding curve of COVID-19 infection, recovering economy, unemployment reduction, and the government’s monetary stimulus packages have encouraged the buyers to return to the housing market. Additionally, cheap mortgages and possible inflation predictions have fueled the demand, creating an imbalance in supply and demand.

The interest rates are unlikely to take a U-turn pretty soon, and experts don’t expect skyrocketing figures either. In truth, rates are still relatively low, as the 30-year rate was nearly 5% even a decade ago. Yet, what could be the impacts of the steady rising rates?

Treasury Yields Could Increase Even More

After bottoming at 50 basis points, the 10-year Treasury yield has been growing since August 2020. On February Friday, it was 1.35%, which has a high chance of growing even more and reaching 1.5%. 

However, the yield won’t increase rapidly unless inflation breaks out or the Fed tightens the policy. Even if inflation happens, it is unlikely to go out of control. Any policy change is not on the horizon, too, since James Bullard, the St. Louis Fed President, dismissed this possibility.

Refinancing Applications Drop

The increasing mortgage rate has caused a decrease in refinancing applications, which is understandable because a home loan refinance directly relates to the ups and downs in the weekly mortgage rates.

The good news is that even with a slight downward curve, the refinancing rate is still much higher in the year-to-year index. It fell just 5% from the previous week, but the rating is still 51% higher than the same period in 2020.

The gap is minimal if you consider the total refinancing applications. It decreased just 0.9% from the previous week’s 70.2%.

Buying Trend Will Continue

Interest rates creeping up have curbed the refinancing trend slightly, but rates are still low enough for buyers to apply for a mortgage. According to the data from the National Association of Realtors, the housing market is hot as the year-to-year home buying rate in January 2021 jumped 24%.

The data indicates a booming buying trend all across the country. The demand is much higher than the number of homes in the market. Morgan Stanley Investment Management’s head of global macro strategy, Jim Caron, thinks that the buying trend will take a huge leap in the coming months.

The new stimulus package will grant individuals a $1,400 stimulus check (the previous one was $600), which will give people more buying power. Caron reckons that a considerable portion of that money will go into the housing market.

Sources: Marketplace, CNBC & Financial times

We are all using more technology: Seesaw, Zoom, Hangouts, Slack, Teams, more Amazon, more Netflix, more online classes, etc. We had to learn to support our children during online classes and create areas in our home for conference calls. 

What is interesting about this is that we have seen a very significant shift in how people think about their living space. The old model was “Office was for Work” and “Home was for Family.” This is clearly not the case anymore, and the lines between where we work are no longer visible – even the more senior professionals work at Starbucks, WeWork, and now finally at home.

We have seen a clear shift up in consumption patterns for renters and buyers. In Singapore, where we are based, it’s very difficult to find larger units to rent for professional families. Google, Microsoft, Morgan Stanley, JPMorgan, Capital One, Zillow, Slack, Amazon, PayPal, Salesforce, and other significant companies require staff to work from home.

The requirements are more bedrooms, bigger spaces, quiet areas, etc. Another interesting outcome is that since families are spending more time at home (not traveling), they can invest more, rent or buy larger homes, better vacation homes, etc.

This is being echoed at GMG, where our mortgage demand sees very clear patterns of increased demand and pricing:

Over the past 12 months, we have funded: 5 loans in Aspen, 1 loan in Montana, 23 loans in Florida, and 9 in Austin alone!

Let our team of U.S. mortgage specialists discuss how you can secure a mortgage while living overseas, without any U.S. income, U.S. credit. We only work with Overseas Expat and Foreign Nationals, so we know precisely the solutions required to meet your mortgage needs.

Who we are

Global Mortgage Group, through its wholly-owned subsidiary, America Mortgages Inc. is a mortgage broker focusing only on U.S. Expats and Foreign Nationals living overseas. We offer over 150 U.S. bank and lender programs direct to our international clients.

Global Mortgage Group Pte. Ltd. is a leading international mortgage specialist. Based in Singapore with offices and partnerships across the globe, we connect our international clients to our network of lenders around the world. GMG offers financing solutions in the U.S., U.K., France, Canada, Australia, Thailand, Hong Kong, and Singapore.