As Gas Prices Rise, Home Affordability Wanes Will It Hurt Knoxville Area Home Sales?
With crude oil at its highest levels since October 2008, retail gas is up 8 cents per gallon this week.
It’s bad news for home buyers and mortgage rate shoppers. The same force that’s driving oil higher is linked to rising mortgage rates.
Now, there are other reasons why crude oil is rising, but the fading U.S. dollar is one of the major ones and it’s why we’re addressing it.
The dollar has a similar impact on mortgage rates.
Mortgage rates are based on the price of mortgage bonds that — like crude oil — are also denominated in dollars. As the dollar loses value, so do mortgage bonds. This causes demand for bonds to drop and prices on bonds to fall.
Because bond prices and bond rates move in opposite directions, mortgage rates rise and thisis precisely what’s happening on Wall Street today.
Since touching a 5-month low in early-October, mortgage rates have tacked on as much as 1/2 percent, depending on the product. Moreover, with the dollar showing no signs of a rebound, the upward pressure on rates should continue.
If you’re trying to time the market bottom, you may have already missed it. Consider locking your mortgage rate before rates increase even more.