Do Renters Benefit from High Mortgage Rates?

Despite the effects of recession the real estate mortgage rates have been following a continuous rising trend. In fact recently the home mortgage rates augmented for three weeks continuously striking an eight month high.

30 year mortgage rates averaged 6.42% and 15 year mortgage rates rose from 6.06% to 6.12%. Each of them carried an add-on fee of 0.4 points. 5 year adjustable mortgage rates rose from 6.02% to 6.19%. Its add-on fee is 0.5 points.

The rising mortgage rates have changed the real estate market from a sellers or buyers market into a renters market. Home owners are finding it difficult to meet mortgage payments. To prevent defaults and foreclosures their only option is to sell the house.

The slump in the economy has triggered a downward spiral in the home sale prices. Home owners would always like to sell their homes at a price that matches the actual worth of their homes. Since that price is not forthcoming at present they are deferring sales of real estate in the hope that prices will level out soon and they will get a better deal in a sale transaction. Sales have fallen by 2.6 %- 5.99 million units annually.

Meanwhile they rent their homes so as to recover the high mortgage payments at least partially. Hence more and more homes are available for rent for the renters at very low rent rates.

Renting a home is turning out to be cheaper than buying it in today’s market conditions. This explains the huge spate in the number of renters in the market. They are able to save up to half of the monthly mortgage rates they would have had to pay had they bought the house rather than rented it.

Renters are able to obtain like or better homes for rent for the same amount of money they spend on buying the home with a mortgage loan. Hence they are suspending decisions to buy homes in favor of renting homes.

It is also more advantageous to be a renter than a buyer in the scenario of rising mortgage interest rates, because the home prices are expected to drop further and buying in future will lead to bigger savings and profits for purchasers. It is also better to resort to buying homes after the tornado season that can damage your home and prove expensive if you are not well insured. Renting is thus a cheaper proposition than buying at present.

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