Advertiser Disclosure

advertising disclaimer
Skip to main content
houses with arrows

Mortgage Rates See Highest Jump in Almost a Year: Investor Impact

Mar 05, 2021 by Aly J. Yale
Get our 43-Page Guide to Real Estate Investing Today!

Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.

*By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

If you’re eyeing a new investment property, take note: Mortgage rates are on the rise. According to the Mortgage Bankers Association, the average interest rate on 30-year mortgage rates notched its highest week-over-week jump in nearly a year last week. Rates, which currently sit at 3.23%, are now at their highest point since July.

Naturally, if you’re considering financing a new property investment, this will mean higher costs. On a $150,000 home, for example, today’s rate would get you a monthly payment of around $650 (without tax and escrow costs). A few weeks ago, when rates sat at just 2.86%, you would have paid $620 per month.

It’s not a huge amount, of course, but over time, it could add up. Throw in what experts are saying about future rate hikes, and the news should give you pause as you gear up to make that next investment. Here’s what you need to know.

Will rates keep rising?

This week’s rate bumps aren’t isolated. They’ve been rising steadily since the start of the year, jumping from 2.86% at the beginning of January to the 3.23% we see today. Experts chalk it up to the improving economy, worries of inflation, and ever-growing coronavirus vaccinations.

“Mortgage rates have moved higher with more good news on the vaccine front and the stimulus package having passed the house and now being in the Senate to vote on,” said Melissa Cohn, executive mortgage banker at William Raveis Mortgage.

As the economy continues to improve and vaccinations get more widely distributed, it stands to reason rates will continue upward. Fortunately, according to Sam Khater, Freddie Mac’s (OTCMKTS: FMCC) chief economist, the increases probably won’t be as drastic as we’ve seen these last few weeks. He said:

Since reaching a low point in January, mortgage rates have risen by more than 30 basis points, and the impact on purchase demand has been noticeable. While purchase activity remains high, it has cooled off over the last few weeks and is currently on par with early March, prior to the pandemic. However, the rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a strong spring sales season.

Options for your next investment property

If you’re actively searching for that next investment property and want to minimize financing costs, you may want to get moving now. Many lenders offer 90-day rate locks (or longer, for a fee), which can ensure you get today’s lower rates no matter where the market heads.

You might also consider making an all-cash offer. Not only can these help you stand out in a bidding war (something common in today’s short-on-supply market), a new study shows you’ll pay about 12% less, too.

If you don’t have the cash on hand just yet, refinancing an existing property in your portfolio or leveraging a home equity loan might be able to help.

The bottom line

Mortgage rates are up -- and they’re likely to rise more in the coming months. If you’re eyeing a new investment property purchase, make sure these higher rates are on your radar, and start strategizing today. The quicker you’re able to act, the lower rates you’ll likely secure.

The "Unfair Advantages" of Real Estate Just Got a Whole Lot Better

Investing in real estate has always been one of the most effective paths to financial independence. That's because it offers incredible returns and even more incredible tax breaks.

These benefits weren't enough for Uncle Sam, though, as a new tax loophole now allows those prudent investors who act today to lock in decades of tax-free returns. We've put together a comprehensive tax guide that details how you can benefit from this once-in-a-generation investment opportunity. Simply click here to get your free copy.

The Motley Fool has a disclosure policy.