Last week, the average 30-year fixed-rate mortgage rose to 4.16 percent, while the Federal Reserve raised the federal funds rate for the first time in a year, and only the second time this decade.
How does this affect homebuyers? Redfin is on the record predicting that in 2017, rates won’t average above 4.3 percent for the year, as Redfin chief economist Nela Richardson explained in detail in a recent post on rates.
But what if rates were to continue to rise? Very few homebuyers would stop their search, according to a recent Redfin-commissioned survey of people planning to buy a home in the next year. When asked “If mortgage rates were to rise above the current 4%, what effect would it have on your home-buying plans?” only 2.6 percent of respondents said they’d cancel their search.
If Mortgage Rates Rose Above the Current 4%, What Effect Would it Have on Your Homebuying Plans?
One in four buyers said the increase would have no impact on their plans. Others said the rise would affect their plans, but they wouldn’t give up: 22.6 percent said they’d look in other areas or buy a smaller home to account for rising payments, while 23.8 percent said they’d increase their urgency to buy before further increases. Lastly, 25.8 percent said they’d slow down their search, to see if rates would go back down.
Why are homebuyers so resilient? While there’s no definitive answer, often homebuyers are searching for a new home because of a major life event, such as a birth or a marriage or a job relocation, which can’t easily be timed to the market — but which still motivates a purchase along its own timeline.
And while rates have climbed, they’re still historically low, which many homebuyers realize.
Redfin commissioned SurveyGizmo to field a study of 3,300 people who bought or sold a home in the past year, tried to buy or sell in the past year, or plan to buy or sell in the next year across 11 major markets. These respondents were sourced from SurveyGizmo’s panel sample partners. SurveyGizmo set quotas to reach 300 people per market.
Of the 3,300 respondents, 934 said they were planning to buy in the next year, and were asked the question above. The survey was conducted between December 2nd and 14th.
