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Rob Chrisman's Corner: Rates have gone up. Now what?

JMAC’s experienced brokers know that rates have gone up because the U.S. economy is doing well. And while few welcome higher interest rates, they should not be a considerable deterrent to someone who really wants to buy a home.

Rates under 5% have been the norm for a decade, and have a way to go for rates to be even close to the historical average. Rising home prices, fueled by strong demand and tight inventory, have pinched buyers in recent years. Lower interest rates helped temper that rise, but as they move higher, borrowing becomes costlier and can reduce a buyer's budget.

Many expect home prices to continue to rise in 2017, but at a slower pace – which could very well let income increases catch up somewhat. In many areas, the supply is still low compared to demand and that will keep pressure on prices and rents. The rate increases could be felt more by house hunters in the country's more expensive markets.

Our brokers also know that rates are expected to continue to gradually increase throughout 2017 – at least short-term rates. A higher Federal Funds rate makes it more expensive for banks to borrow money, which can lead to higher rates on credit cards and home loans. But despite potentially higher Fed Fund rates in 2017, mortgage rates may not rise alarmingly.

As rates move higher, we could see the return of more home loan products, such as adjustable rate mortgages. JMAC has a solid inventory of flexible, non-agency jumbo products, for example. Non-traditional mortgage products could start to creep back into the market as consumers search for more affordable options.