Is Rising Home Mortgage Costs Good in the Final Analysis?

If one asks a person on the street, the last thing that he would support is increase in home loan rates. However, when one looks at the movement of mortgage rates, it has steadily been moving in the northward direction. While there are many people who are very concerned about such increase in home loan rates, there are others who feel it might be the right thing happening out there. It would be interesting to find out why it might be a good thing after all when interest rates are moving upwards in most of the provinces.

Understanding the statistics

Before we get into finding out the pros of such hike in interest rates, it would be not a bad idea to have a look at the figures. The rates have certainly gone up by almost a percentage point for all 30 year home mortgage loans. Against an average rate of around 3.54% a year ago, today, the average rate is around 4.41%. There is more to come. According to estimates, the home loans rates will most probably be touching 5%, by the end of the year.

Positives of rising home mortgage costs

However, when one looks the increasing home loan rates from the right perspective, there are certainly some advantages associated with it. It would be not a bad idea to have a look at a few of them, over the next few lines. In view of the increased interest banks are now finding out ways and means by which they can find out new customers. After the 2008 disaster, home loans were a strict no for most of the applicants but now it appears that banks are ready to loosen the purse strings, a bit more. Higher interest rates often result in lower down or initial payments. As customers, your loan to initial payment ratio is bound to increase significantly. This certainly augurs well for the people who are finding it difficult to manage the margin money. However, this should be looked into the context of being tied to a high cost loan for a longer period of time.

Last but not the least, because of increased rates, you will be able to close these home mortgage loans. Many lenders have started quoting lock-in periods of 30 days compared to 40 to 75 days when the rates were lower. This again is good news for all those who wish to pre-close their mortgage loans. Finally, increased rates will certainly translate into better services for the customers.

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