Massachusetts homebuyers aren’t being scared off by rising mortgage interest rates, according to area lenders and real estate agents. In fact, the only factor keeping many from buying homes is a lack of inventory, some say.

Mortgage rates have for the most part increased by more than one point compared to the same time a year ago, and recent rate hikes by the Federal Reserve have sparked some fears that the homebuying market may be adversely affected. But those in the industry say higher rates aren’t deterring most people, and they don’t expect them to anytime soon.

The mortgages are still at a very attractive rate, said Howard Miselman, president of Continental Funding Corp. in Stoughton and chair of the Massachusetts Mortgage Association. It’s still competitive out there. You can still borrow in the sevens.

Miselman said that while rates for long-term borrowing such as a 30-year fixed-rate mortgage are creeping higher, lenders can still arrange lower rate adjustable mortgages that allow homebuyers to continue to take advantage of better rates.

The broker has the tools to get people in, he said, adding that programs are available to get someone a home with no money down. The higher rates have some impact, but the mortgage companies always adjust.

Miselman said a key difference in recent interest rate hikes compared to previous years is that there have been consistent increases without any drops. It never went down, he said. Before, if you were to look at a period of increase on a graph, it would be like a zigzag with some decreases, but this has been just a slow, steady rise.

I don’t think it’s changed anyone’s mentality in buying a home, said Luann Harvey, a mortgage originator at Lee Bank in Great Barrington. Business has been steady, it hasn’t decreased. People are still buying.

Sometimes if people hear rates are going up, they’ll get off the fence and buy. This motivates them, she said.

According to Aleta Pruesse of Compass Real Estate in Orleans, higher rates aren’t deterring buyers on Cape Cod. We still have so many buyers and so few sellers, but we usually see [trends] later on the Cape, she said. Every weekend we still have busloads of people coming down to look at houses.

Fred Meyer of University Real Estate in Cambridge and president of the Massachusetts Association of Realtors said he was amazed that higher interest rates had not prompted a slowdown in the Massachusetts real estate market.

We’ve had a one point rise in 30-year rates, which is enormous, Meyer said. Considering housing is the single biggest purchase that is mostly financed, it’s amazing.

Meyer, like others Realtors, said a lack of inventory was mostly responsible for the strong market. Those sentiments could also be heard in other parts of the state.

We’re still having bidding wars, said Bernadette Gibson of Coldwell Banker Hunneman Victor in Andover and president of the Northeast Association of Realtors. The only time I’ve encountered [the mortgage rate’s effect] is with first-time homebuyers. With prices continuing to go up and the added interest, it’s sometimes tougher for them.

High Prices
Miselman said increasing home prices are probably having a greater impact on deterring potential homebuyers than interest rates.

The prices are so high right now, he said. If a house was selling for $120,000 before, it’s going for $150,000 now. If you’re still looking to put 20 percent down on a house, that’s where it starts to get difficult.

The entry-level people are hurt by it, Meyer observed, but the high-end sales are less subject to the effects of higher rates. He added that while higher rates may scare some buyers away, in other cases the rates may have the opposite effect. It sometimes spurs them to act now when they otherwise wouldn’t, he said.

The impact of the rising mortgage rates also varies among the different generations of homebuyers, some observed.

The baby boomers have seen these high rates before, Gibson said. This still isn’t bad for them. Anything under 10 is still good. The younger generation of homebuyers have never seen the rates up in the eights before, so they might be a little more scared by it.

I can still remember when the rates were in the 10s, Misleman said, adding that many homebuyers who were familiar with rates at that time probably still see today’s rates as a bargain. When rates first went down to 9.95, everyone thought that was the best deal in the world.

Last year I remember doing a 15-year fixed-rate mortgage for 5 7/8 percent, he continued. But 7 7/8 percent is still a good deal.

Anything in the single digits is still great.

Rising Rates Have Not Yet Chilled Home Sales Market

by Banker & Tradesman time to read: 3 min