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4 Your Money is brought to you by NelsonCorp Wealth Management.
It’s now time for 4 Your Money. We’re joined by James Nelson, Financial Planner at NelsonCorp Wealth Management. Welcome back James.
Thanks for having me, Brandy.
So with mortgage rates continuing to climb, we still haven’t seen major housing price declines as some thought we might. So what dynamics are at play here?
Yeah, there’s a lot of factors in play, but most of it boils down to a combination of interest rates and inflation. The 30 year mortgage has been hovering around 8% here now for a while, which has put a significant damper on demand. Now, on the other side, we’ve got a lot of mortgages that were refinanced a couple of years ago at record low levels around 3%, 3.5%. And we’ve got a chart here that shows the current mortgage rate in red and then the effective mortgage rate in blue. And the effective mortgage rate is the weighted average rate of all outstanding mortgages. So you can see that difference between the red and the blue line there is currently 4% is the spread, and that is the largest ever.
All right, so what does this mean for viewers who might be considering a move now?
Yeah, so I think we have to look at the numbers carefully, first and foremost. But it’s easy for people that want to jump into maybe a new mortgage, want to upgrade. Since housing prices have still gone up the last several years, it’s easy to want to jump in there and upgrade. But when you’re taking a 3.5% Current mortgage up to say 7.5%, 8%, that is a big deal and that’s a significant difference. So a few things people should consider. You may be forced to move, you may be forced to go into a different mortgage, if that’s the case an adjustable rate might be appropriate for a period of time. And then if possible, if you’re able to put down a little bit more on the down payment and finance less, that’s also a good option.
All right, James. As always, thanks for joining us.