“I think it’s as we get further than three to four years from the pandemic and those low rates, we’re starting to see a psychological adjustment,” Todd told Mortgage Professional America. “This all started in 2022, and we went from rates in the threes and fours, which were abnormal. I’ve been doing this long enough to know that 5%, 6%, and 7% are normal interest rates long term.”
Affordability challenges
Where Todd is located in Portsmouth, New Hampshire, he has seen affordability issues firsthand. He has witnessed many people unable to afford to live in the areas where they grew up.
“Unfortunately, it’s just not affordable for some people to live on the Seacoast where they grew up,” he said. “That’s tragic. And it’s a lot of cases. I grew up in York, Maine, which is 10 to 15 minutes from Portsmouth. A lot of people who I grew up with can’t afford to live here any longer.”
While the current rates might make selling that low-rate mortgage unappealing, one thing Todd tells those customers is that they are likely sitting on a lot of built-in equity in their current property. This can allow them to put a sizeable down payment on a new home, which can ease the pain of giving up that low-rate mortgage.
“People who want to be here are starting to adjust to it,” Todd said. “They have to remember they have a lot of equity in their existing house. The challenge is for first-time buyers to get in, but if you’ve owned a house, you’ve got a lot of equity that you never had before. If you’re ready to make the move, you’re going to get a slightly higher interest rate, but you’ve got a lot of down payment that you didn’t have before.”
