The average interest rate on 30-year fixed rate mortgages spiked to its highest level in more than a year Friday. Buyers who started looking for mortgages when rates were in the 3.5% range suddenly found themselves – in the space of a week – looking at 4.125% rates.
While buyers in a strong financial position can handle a rate spike that extreme, those closer to the lower limits of mortgage eligibility can find themselves out of a deal, CNBC reported. While mortgage rates are still historically low, a spike from the 3% range to the 4% range means many buyers won’t qualify because they suddenly have too great a debt-to-income ratio.
“It’s kind of sad because you’re helping out a first-time buyer who is in need of these low rates and doesn’t have the personal liquidity to offset if the rates rise,” one New York lender told CNBC.
The lender has two clients that have been impacted by the sudden rate spike. “One is on the bubble, but one is almost a dead deal.”
And with the Federal Reserve expected to hike the benchmark interest rate next month, mortgage rates could go even higher.
Have your customers been impacted by the rapid rate increase? Let us know your experiences – and how you’re helping clients – in the comments below.
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