Homeowners were eager to refinance their properties about 15 years ago because they believed interest rates had reached an all-time low. "Thirty-year fixed rates were at 5.3 percent then, which was a rock-bottom point," remarked Keith Gumbinger, vice president of the mortgage data company HSH.com. Because of the extremely cheap borrowing rates, "we became spoiled."

From late 2016 to early 2017, the mortgage rate increased from 3.5 percent to an average of 4 to 4.25 percent. Mortgage rates are anticipated to increase somewhat in 2017, although Redfin, a real estate agency, predicts that they won't reach 5% anytime soon.

There is no reason to believe they will return to the 3.5 percent either, according to Gumbinger. "Markets became fixated on stronger growth, and now that a new administration and election have taken place, prospects for lower mortgage rates are slim."

Homeowners Who Are Concerned About Projected Increases In Mortgage Rates

Buyers are understandably anxious about the future in the meantime. But there's no need to panic. According to Danielle Hale, managing director of NAR's housing research, there haven't been any significant changes in home sales, foot traffic, or buyer and seller activity.

"Although there has been a decline in several indications of housing market activity, the mortgage rate is simply one of many things that influence consumer choices. The impact of rising mortgage rates may be mitigated by the steady increase in employment over the past couple of years and the acceleration of income growth over the past few months.

Redfin representative Andrew Vallejo claimed that everyone's thoughts are "haunted" by the escalating prices. Some purchasers may feel a little more motivated and take action more quickly as a result. However, the rates won't have a significant impact on property values or prices, and they won't drive customers to buy more quickly.

Redfin predicts that rates won't rise above 4.3 percent on average in 2017, in large part because the government is a significant mortgage investor.

Redfin said in its housing forecasts for 2017 that "the recent rise in rates is largely attributed to Wall Street optimism regarding [President] Trump's proposals for increased infrastructure spending and tax cuts." "Relative to historical averages, rates are still very low and are anticipated to stay lower than in 2015, when the 30-year fixed rate was 4.5 percent."

According to Redfin, the likelihood of inflation and economic growth in 2017 should also keep mortgage rates low.

According to Redfin analyst Jeffery Marino, if interest rates were to sharply rise, it would be as a result of a radical shift in the economy, such as rapid job growth or high inflation. "The increase has, for the most part, been negligible, and our agents have not yet reported a material impact on the market."

Gubinger concurred. Consumers continue to purchase homes, he noted, even at the historically favorable 5 percent rate compared to a decade earlier. However, the rate may have an impact on what is offered and what consumers can afford.

What Potential Homeowners May Afford Changes When Mortgage Rates Rise

More than 800 Redfin agents were polled for the survey, which was conducted in late 2016, and the brokerage discovered that rather than selling their houses, buyers preferred to rent them. 49 percent of respondents claimed that purchasers would change their searches and look for less expensive properties.

19% of those surveyed believed the rate increase would have no impact, 16% were worried that the market would decline considerably, and the same percentage indicated prospective sellers with low mortgage rates would promise not to sell in order to keep their affordable mortgage.

However, Marino discovered while examining the findings of a survey conducted last year on rising mortgage rates that rates varying by a quarter to a half percent probably won't prevent homeowners from selling their homes.

The findings supported a separate Redfin study of homebuyers, which found that less than 3% would give up looking for a home if mortgage rates increased above 4%:

• 26 percent indicated that they would slow down their search to see if rates fell once again.
• 25% claimed that they wouldn't be affected by the rate fluctuation.
• 24 percent said that it would make buyers more eager to purchase before rates rise further.
• 23 percent of respondents indicated they would continue to feel the urgency but would look for a smaller house.

Vallejo counsels his clients to make wise choices based on their level of comfort and familiarity with market movements. He also advised them to compare lenders and bargain for the cheapest prices.

Advice For Homebuyers To Increase Their Purchasing Power

A 30-year mortgage offers cheaper rates for buyers who want to reside in their property for an extended period of time. But he advises individuals who plan to sell within five years to buy at the current prices.

The Austin, Texas, agent explained that homeowners might also pay points at closing to achieve a cheaper rate over time.

According to Gumbinger, there are factors affecting the housing market that could affect mortgage rates in the future. The real estate industry is still recovering. The effects of bankruptcies and foreclosures are still being felt by borrowers. Despite this, builders are still cautious. It can be challenging for those who still wish to purchase.

Gumbinger provided the following suggestions to assist clients in reducing their rates:

• Have the highest possible credit rating. The finest credit score entitles you to the lowest rate. "If you have good credit, you may find yourself at 4 5/8 percent instead of 4 1/4 percent, if you're further down the credit strata."
• Take into account paying points or interest in advance: A point costs one percent and lowers your interest rate by one-fourth of one percent.
• Consider an adjustable-rate mortgage (ARM) if interest rates start to rise. The most typical version has an interest rate that is fixed for five years, followed by an annual adjustment. Naturally lower interest rates are available, but only for a limited time, after which it becomes risky. "No one can predict what interest rates will be in five years. If we see another downturn, they can be lower, higher, or remain the same as they are right now. Most borrowers find it comfortable to just know what their potential monthly payment would be in order to prepare for "what if" scenarios in the event that rates increase somewhat. You can determine if it's for you or make plans for it.