Iowa’s housing market is currently booming. As more people flock to Iowa’s relatively inexpensive housing, prices have been steadily increasing. These higher prices mean that mortgage rates offerings are more important than ever for potential Iowa homebuyers to research. The higher the housing price, the bigger the long term difference between a 3% and 4% 30-Year Fixed Rate Mortgage.
So what can potential Iowa homebuyers expect in terms of current mortgage offerings? Is there a mortgage rate hike looming in the future? And is now the right time to get a mortgage in Iowa? Let’s dive find out.
Are Iowa’s Mortgage Rates Regionally Competitive?
According to the Consumer Financial Protection Bureau–an official branch of the U.S. Government dedicated to making sure you don’t get ripped off by unscrupulous companies–most Iowa lenders are offering a 30-Year Fixed Mortgage at rates 4% or below for borrowers with average credit scores (700-719). Iowa banks are also offering 30-Year Adjustable Rate Mortgages (ARMs) at rates 3.375% or lower. ARMs typically start out at a lower interest rate than Fixed Mortgages, but as the interest is adjusted annually or bi-annually costs are liable to balloon on unsuspecting borrowers. Whether you decide to stick with the potentially always-higher interest rate of a Fixed Mortgage or risk an ARM, be sure that you aren’t paying a much higher premium than the average.
The good news for Iowa homebuyers is that these mortgage rates are very competitive with neighboring state offers. Illinois, Minnesota, and South Dakota offer the same 30-Year ARM rates and their Fixed rate is only 0.005 less than Iowa’s. Missouri’s, Nebraska’s, and Wisconsin’s 30-Year rates are the exact same as Iowa’s.
How Does the Federal Reserve regulate Iowa Mortgage Rates?
The Federal Reserve is an autonomous branch of the government that acts like a central bank to help control fiscal policy in the U.S. Basically their job is to figure out when they should encourage consumer borrowing and spending and whey to encourage consumer savings and safe, long-term investment. The Federal Reserve does this in a number of ways, but one of the most common ways is to shift interest rates. The Federal Reserve decreases interest rates to encourage spending, as well as stave off high unemployment and increases interest rates to encourage savings, as well as fight back against inflation.
These interest rates have a direct impact on your own mortgage rates. If the Federal Reserve increases interest rates as they loan money to banks and other keystone financial institutions, then that increased cost is passed from the banks to the end-consumer–i.e. you–in the form of higher mortgage rates. If the Federal Reserve cuts interest rates, then the bank’s savings are passed on to you as lower mortgage interest rates so as to keep the bank competitive.
The Federal Reserve doesn’t even have to actually raise interest rates to increase your mortgage rates. Merely talking about a proposed interest rate hike can spook financial institutions such as your bank into raise rates in anticipation of the Federal Reserve’s hike. Although, the opposite situation tends not to be as common.
All this is to say, if you want to guess what’s going to happen to the Iowa mortgage market within the near future, then it is important to consider what the Federal Reserve is doing. And they have been hinting at a interest rate hike in the near future. As recently as March 29, 2016 members of the Federal Reserve have been openly discussing the possibility of a significant interest rate increase to combat signs of increasing inflation.
This is important news considering that the Federal Reserve only last year raised the interest rate for the first time in a decade. That particular interest rate increase was heralded as a sign of recovery from the Great Recession and did little to hurt mortgage rates as it was long-expected. A interest rate hike now, however, would be very painful for homebuyers looking for a good mortgage deal.
Luckily for homebuyers the head of the Federal Reserve, Janet Yellen, has taken an unusual stance. Traditionally the Federal Reserve have only focused on domestic financial concerns such as inflation and unemployment. However, Yellen has decided that the global economic crisis taking place in China and elsewhere is troubling enough that the Federal Reserve will hold off increasing interest rates for the time being. This is great news for Iowa homebuyers, but it’s not known how long this reprieve will last.
So What’s the Advice for 2016?
Given the Federal Reserve’s desire to raise interest rates in the near future and the unstable nature of Yellen’s reprieve it is unlikely that Iowa mortgage rates will decrease anytime soon. In fact, it is far more likely that a not-so-far-off interest rate hike by the Federal Reserve will drive Iowa mortgage rates up. If you are looking into getting a mortgage for an Iowa home, then now is the time to do so. Just make sure you stick with a Fixed Mortgage, as an ARM in the current market is very risky.
2 Point Highlight
“The good news for Iowa homebuyers is that these mortgage rates are very competitive with neighboring state offers. Illinois offers the same ARM rates and its Fixed rate is only 0.005 less than Iowa’s.”
“If you are looking into getting a mortgage for an Iowa home, then now is the time to do so.”
