Real Estate Investment :The Opportunity of Fluctuating Rates

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A time of change can also be one of opportunity, but it sometimes takes real work to capitalize on opportunities when they arise. A season of fluctuating interest rates is one opportunity that can make a real difference for consumers, and it is a time when real estate agents can do their customers a real service.

Why Agents Are in the Right Place

Savvy consumers, whether they are homeowners or home buyers, tend to keep an eye on the state of the mortgage market. After all, interest rates are one of the key determinants of the cost of a home for everyone who has a mortgage. For agents, however, the state of interest rates is one of the core parts of their business and they watch them closely, often on a daily basis. If for no other reason, they pay attention because their customers expect them to have their fingers on the market’s pulse.

As it happens, that’s a reasonable expectation. Agents deal with multiple lenders all the time, so they see the market from multiple perspectives. Lenders, in turn, know that consumers look to agents as influential experts, and, for that reason, many lenders make an effort to keep agents informed, especially when rates are rapidly changing.

For buyers seeking the best rates and sellers trying to price their homes to attract the largest pool of buyers a knowledgeable agent can be an invaluable resource.

Why Rates Matter to Everyone

Unless you are paying cash for your home, a home’s true cost is determined almost as much by interest rates as by the price you pay. For an agent, then, rates can be the deciding factor in a home’s affordability.

This is also true when working with sellers. Rising rates can effectively eliminate a great many buyers, who can be “priced out” of the market as much by rates as by listing prices.

When rates are changing rapidly, time becomes important, especially since different lenders have varying periods for which they will lock in a given rate. If rates are rising, this can be a compelling reason to act now, so that the rate you want is still there when it comes time to close. It can also be a reason to keep closing dates fairly tight, so that last-minute issues, and those issues arise more often than anyone would prefer, do not interfere with a buyer’s ability to keep a favorable rate In place.

Finding the Best Refinance Rates

Buyers and sellers may be the people most obviously affected by fluctuating rates, especially from an agent’s standpoint, but homeowners have their own vested interests in the state of the market, and this is one place where an agent can stay in touch with clients while doing a real service. Periodic updates are especially useful when interest rates are changing and homeowners are seeking the best refinance rates.

What to Watch

There are an enormous number of variables that affect interest rates, and rates themselves change with amounts financed, the duration of financing and, of course, the borrower’s credit score.

In general, real estate loans are offered as fixed or adjustable rates over loan terms of 15 or 30 years. For borrowers looking at fixed rates, it pays to keep an eye on rates for different terms, because the differences are often significant. For those looking at adjustable rates, the variables can be mind-boggling: different indices, different margins added to those indices, different adjustment periods and different terms.

In the U.S., the Federal Reserve is at the heart of interest rate determinations, managing consumer rates by setting inter-bank borrowing rates and manipulating the money supply. Its policies ripple through the lending world, but its pronouncements are famously obscure. For a clearer view of the state of rates, it can pay to keep track of the indices that underlie mortgage lending. Both the Federal Funds Rate and LIBOR, the London Interbank Offering Rate, have direct connections to the amounts consumers pay to borrow.

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