Already difficult, landing a mortgage may actually get a lot harder before it gets easier. We all know the downside now of rising interest rates. Home buyers are in love with rock bottom interest rates, which, at least in theory, have significantly increased their purchasing power. (OK, low rates have also helped reinflate home prices, so it may be more of a wash than many buyers would like to admit.)
And the recent, steady escalation in interest rates has sent some buyers into a panic, hustling to find a property to sign the dotted line on before the Fed-bankrolled gravy train ends.
But buyers are not the only ones scrambling to protect their backsides as rates head up. Bankers are, too. And buyers may soon find that mortgages, already hard to come by, may also get tougher as rates head back up.
After all, your local banker is definitely not in love with today's crazy low interest rates. In fact, the last thing a lender wants to do right now is bulk up on 30-year mortgages with minuscule interest rates, especially if higher rates, and more profitable loans, are just around the corner.
So while higher rates may eventually boost mortgage lending, as rates begin what is likely to be a long, slow upward rise, banks may actually tighten up on their lending.
After all, no bank wants to be the sucker here, settling for a lower rate when simply waiting can produce a bigger payday.
And for your typical banker, the easiest and most natural thing in the world is to do nothing anyway, whatever the reason.
Here's how New York Times business columnist Gretchen Morgenson lays it all out in a recent piece.
"A coming shift by the Federal Reserve in its quantitative easing program may also be curbing banks' appetite for mortgage loans they keep on their own books. These institutions are hesitant to make 30-year, fixed-rate loans before the Fed shifts its stance and rates climb. For a bank, the value of such loans falls when rates rise. This process has already begun -- rates on 30-year fixed-rate mortgages were 4.4 percent last week, up from 3.35 percent in early May. This is painful for banks that actually hold older, lower-rate mortgages."
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues. For the full Boston Real Estate Now blog, visit www.boston.com/realestate.