MICHEL MARTIN, HOST:
Mortgage rates have edged back up to above 7%. That's despite the Federal Reserve cutting interest rates by a full point last year. It's another drag on the country's already tough housing market. So what should you do if you're hoping to buy a home? We're going to ask Mark Hamrick. He is the Washington bureau chief for Bankrate - that's a personal finance website. Mark, good morning. Thanks for joining us.
MARK HAMRICK: Good morning. Good to be with you.
MARTIN: So can we start with the why? Why are mortgage rates rising again after the Fed cut them?
HAMRICK: There's a lot of confusion about that relationship. And first of all, the Fed doesn't really control mortgage rates, although it does control a lot of things. What mortgage rates are really connected to is the yield of the 10-year treasury bond. And those yields have risen rather sharply since last fall, on the anticipation that economic growth may be robust along with inflation in the current year. The ambitious hopes of the incoming administration with respect to the economy, including the potential for deficit spending have inflamed those considerations. And that's why we now do have that 7% 30-year fixed rate mortgage again.
MARTIN: So, let's wheel around to what you can do if you're trying to get into a home. Is there something you can do to get a lower rate? Can you negotiate this?
HAMRICK: Well, let's start, first of all, with what you can do even before you get to that part of the process. And to have a stellar credit score helps to qualify for a lower mortgage rate, and so that will save you money on the mortgage. And so if you have a superior credit score, which shows that you are a good bill payer, that you're qualified to get a mortgage, then you shop around for the best rate. Many people do not think about shopping around. They may take the first mortgage rate or relationship, that, for example, their realtor suggests to them. Those are very often very well baked-in relationships that don't necessarily work well or optimally for the prospective home buyer. Thirdly, is to get pre-qualified for a mortgage to know what you can afford and what you are qualified for. And then you are a better, let's say, looking potential buyer. If you're already qualified, they don't have to worry whether indeed you can get the mortgage that you'll need to pay for the home. But also, think about, let's say limiting our expectations for the home that we're going to purchase at a time when home prices have continued to rise. Can we take something that's a little less or even move elsewhere where it doesn't cost as much.
MARTIN: Any tips for sellers?
HAMRICK: This is a good market for sellers, because the No. 1 problem right now is lack of supply. And in the past, where you might have had to sort of buff and shine your home to get it sold - of course, we're talking generally. Markets are varying widely depending on demand for homes. But I think sellers may need to wait a little bit longer because of the lack of prospective buyers in this affordability challenge market, but they still hold the upper hand here.
MARTIN: And tricky question, briefly, what about waiting? Maybe people should just wait.
HAMRICK: There is no shame in renting. And if we can save more money to fight another day to buy that home, I'd rather see - have people have more money in savings because once you buy that home, you're going to spend money on other things.
MARTIN: That is Mark Hamrick. He's the Washington bureau chief for the personal finance website Bankrate. Mark Hamrick, thanks so much for joining us.
HAMRICK: Thank you. Transcript provided by NPR, Copyright NPR.
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